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

Obviously , a machine you can't do all of those things to it, but you can at least touch it and possibly smell and taste it.

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

So it would be patent amortization.

Amortization is the exact same thing, but it deals with intangible assets.

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

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

Depreciation is tangible.

Ancillary would be number 2 referred revenue.

So therefore, I put it down there.

If you've watched the video on depreciation and amortization, this might even include the depreciation on some of the physical assets they've bought, or maybe the amortization on the rights to the name Super Pizzeria.

They're usable over two years.

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

And then their SG amp A is the same.

So I'll just write down the number first.

And there's all sorts of intangible assets that you might amortize.

Another type of sale is an actual asset sale, direct sale.

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

This is the interest rate you assume.

We decided that we needed to put our money where our mouth is.

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

Well, you know depreciation, man.

So instead of doing that, what you do is, at the beginning of the period you say, we have acquired a patent, an asset, that is worth 4,000, And then every year over the life of the patent, we'd amortize a fourth of it since it has a four year life.

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.

And just so you know, most corporate debt actually works that way.

With private ownership nonexistent, our wellbeing is on the rise.

So let's say when we liquidate it so we go into bankruptcy and essentially all of the assets are taken into possession by the bankruptcy court they're going to sell these assets.

This is all a review of the depreciation video.

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

So no cash went out of the door.

So its assets.

I'll do that in yellow.

That assets, A for assets, is equal to

left hand side of the equation.

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

No, we didn't.

That's just the gasoline cost.

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

Malibu Equity and Investments.

And what I wrote here is, it has 4 billion of liabilities.

You'd have to give up 93 of your net worth.

I don't want to draw this box.

And rich, eh?

Remember liabilities plus equities are equal to assets.

Our profit, once again, is 30,000.