And then their SG amp A is the same.

Really, in my mind, it's very similar to depreciation.

So I'll just write down the number first.

So therefore, I put it down there.

They're usable over two years.

To figure out the cash from operations from actually how much cash the operations are producing.

So no cash went out of the door.

If you divide 50,000 by 4, it's 12,500.

So I used half of it in year one.

Our profit, once again, is 30,000.

And amortizing really just means spreading out the cost of this asset, just like depreciation was spreading out the cost of a physical asset.

Well, you know depreciation, man.

And then instead of having an equipment expense, instead of having that expense, they'll have an equipment depreciation expense.

amortization. Amortization is to spread out a non tangible cost over a period of time.

No, we didn't.

And then at the end of 2010, it'll say the machine is worth nothing.

So 20,000 over 3 years is the life of that truck.

Nothing fancy.

So for example, depreciation, this was factory equipment, and it gets old as I use it, so I spread out its cost.

And then we have depreciation, and we want to think a little bit in this video, what does the depreciation do to the cash flow statement?

Accounts Receivable, that they're not changing over the course of the year.

And then the other 250,000 essentially went to an expense called depreciation, which is right there.

Our starting cash was 50,000, we had 50,000 from operations, now our ending cash is 100,000.

And we'll talk later about depreciation and amortization and how we might change what these values are, but a very simple way is, if you went out and bought 10 million worth of stuff, you'd write on your books, I have a 10 million asset.

So the way you'd think about this is instead of having factory retooling, you could say factory tool.

And this is just an arguably long winded way of saying that the way you account for this is you spread out the cost over time, over its useful life, and this spreading out is called the depreciation of an asset.

So, for example, in this one, at the beginning of the period, before the 2007 income statement, the asset was worth 50,000.

And let's say we do a straight line depreciation, which means we essentially depreciate the asset evenly over its lifespan.

Thank you.

Depreciation is tangible.

And I'm running out of time in this video, and I'll cover it in the next, but you might have also heard of the word

That's just the gasoline cost.

And then to go from 3 to negative 3, well, we subtracted 6 again.

The fact that this machine right here that cost 50,000 is used for in this example, in the depreciation video, it was usable for two years.

learned how to graph it.

We've cut expenses. We're breaking even.

Are you all right, sir?

They could slow down by about 50 percent.

Improvement of natural energy technology

The price of this book has been reduced by half.

The value of this book has been halved.

Stop harassing the waitress.

Equalizing.

They will cut down on their expenses.

I'm hungry!