0:00:00.000,0:00:00.840


0:00:00.840,0:00:05.420
I figure now is as good a time[br]as any to learn about probably

0:00:05.420,0:00:08.420
what most people focus the[br]most on when they analyze

0:00:08.420,0:00:10.190
companies, and that's the[br]income statement.

0:00:10.190,0:00:13.600
And the income statement is[br]one of the three financial

0:00:13.600,0:00:15.620
statements that you'll look at[br]when you look at a company.

0:00:15.620,0:00:17.360
There's the income statement[br]and the other two are the

0:00:17.360,0:00:21.560
balance sheet, which I have[br]drawn a lot in a lot of the

0:00:21.560,0:00:23.760
other explanations I've done[br]on the financial crisis and

0:00:23.760,0:00:24.330
whatever else.

0:00:24.330,0:00:25.640
And actually, in this video,[br]we're going to see how the

0:00:25.640,0:00:27.750
income statement relates[br]to the balance sheet.

0:00:27.750,0:00:29.670
And, of course, the last one--[br]well, it's not of course if

0:00:29.670,0:00:31.015
you don't know it-- is the[br]cash flow statement.

0:00:31.015,0:00:35.480


0:00:35.480,0:00:38.190
And we'll focus on that a[br]little bit later because

0:00:38.190,0:00:40.080
that's a little bit more[br]nuanced relative

0:00:40.080,0:00:41.730
to the income statement.

0:00:41.730,0:00:44.570
So the income statement is[br]literally just saying how much

0:00:44.570,0:00:47.925
a company might earn in a given[br]period, and it's always

0:00:47.925,0:00:48.920
related to a period.

0:00:48.920,0:00:51.890
So it could be an annual[br]income statement.

0:00:51.890,0:00:53.790
It could be for the year 2008.

0:00:53.790,0:00:55.480
It could be a quarterly[br]income statement.

0:00:55.480,0:00:56.970
Those are usually the two[br]types that you see, but

0:00:56.970,0:01:01.390
sometimes, there's monthly or[br]six-month income statements.

0:01:01.390,0:01:05.080
And the general format is pretty[br]consistent, although

0:01:05.080,0:01:07.410
there is a lot of variation[br]depending on what a business

0:01:07.410,0:01:10.320
does, but in this video, I[br]really just want to cover

0:01:10.320,0:01:13.020
almost a plain vanilla income[br]statement for a company that

0:01:13.020,0:01:14.680
just sells a widget.

0:01:14.680,0:01:17.980
So the first thing when you sell[br]a widget is you make it

0:01:17.980,0:01:19.440
and you just sell it.

0:01:19.440,0:01:20.290
You sell the widget.

0:01:20.290,0:01:25.630
You give a customer a widget,[br]and they give you some money.

0:01:25.630,0:01:28.310
And that money that they give[br]you-- and I'm not going to get

0:01:28.310,0:01:30.040
too technical about the[br]accounting right now-- is

0:01:30.040,0:01:31.290
considered revenue.

0:01:31.290,0:01:34.360


0:01:34.360,0:01:39.080
It's sometimes considered[br]sales.

0:01:39.080,0:01:41.590
And that's literally the money[br]that they give you at a

0:01:41.590,0:01:42.620
certain period of time.

0:01:42.620,0:01:44.760
And some of you accountants out[br]there are like, oh, well,

0:01:44.760,0:01:46.450
no, that's not just the money[br]that they give you.

0:01:46.450,0:01:48.680
It's the money that you've[br]earned in a certain period of

0:01:48.680,0:01:49.710
time, and that's true.

0:01:49.710,0:01:53.790
But for our sake, let's just[br]say that when you give the

0:01:53.790,0:01:56.410
widget, you have earned the[br]money that they give you, and

0:01:56.410,0:01:57.460
that's revenue sales.

0:01:57.460,0:01:59.750
Later on, we'll talk about[br]different ways to account

0:01:59.750,0:02:01.200
revenue and sales.

0:02:01.200,0:02:03.620
So let's say the revenue or the[br]sales in this case in a

0:02:03.620,0:02:05.060
given period, let's say[br]that this is an income

0:02:05.060,0:02:07.700
statement for 2008.

0:02:07.700,0:02:13.050
So over 2008, we sold[br]let's say $3

0:02:13.050,0:02:14.570
million worth of widgets.

0:02:14.570,0:02:19.180


0:02:19.180,0:02:24.340
So let's say it's $3 million.

0:02:24.340,0:02:26.970
And a lot of times when you look[br]at income statements for

0:02:26.970,0:02:28.040
companies, if you go to Yahoo!

0:02:28.040,0:02:30.310
Finance, you could do this right[br]now, instead of writing

0:02:30.310,0:02:32.520
$3 million, you'll[br]see $3,000 there.

0:02:32.520,0:02:33.160
It's like, oh, my God!

0:02:33.160,0:02:35.440
This company, they're hardly[br]selling anything.

0:02:35.440,0:02:39.250
But it's kind of a standard that[br]they tend to write things

0:02:39.250,0:02:40.050
in thousands.

0:02:40.050,0:02:42.950
So 3,000 would be[br]3,000 thousands,

0:02:42.950,0:02:44.000
which would be 3 million.

0:02:44.000,0:02:46.060
And for really big companies,[br]they actually sometimes write

0:02:46.060,0:02:47.330
their numbers in millions.

0:02:47.330,0:02:50.530
So if you saw 3,000 there, it[br]would actually mean 3 billion.

0:02:50.530,0:02:53.190
But we'll actually look at real[br]income statements in the

0:02:53.190,0:02:54.310
not-too-far-off future.

0:02:54.310,0:02:57.770
So that's how much money[br]they give us.

0:02:57.770,0:03:01.910
But that's not how much income[br]we made, because there was a

0:03:01.910,0:03:04.750
lot of cost that went into[br]making that widget that we

0:03:04.750,0:03:05.280
have to account for.

0:03:05.280,0:03:07.710
It's not like when someone gives[br]me $3 million, I can

0:03:07.710,0:03:09.100
just say, oh, I made[br]$3 million.

0:03:09.100,0:03:10.460
Let me just put it[br]all in the bank.

0:03:10.460,0:03:11.040
I'm done.

0:03:11.040,0:03:12.980
That was all income.

0:03:12.980,0:03:15.720
So the first thing that you[br]tend to see on an income

0:03:15.720,0:03:18.930
statement is the cost of those[br]actual widgets, the cost of

0:03:18.930,0:03:21.510
producing those widgets.

0:03:21.510,0:03:25.550
And I'll put all my expenses[br]in magenta.

0:03:25.550,0:03:30.870
So it'll sometimes be written[br]as cost of sales or cost of

0:03:30.870,0:03:32.120
goods sold.

0:03:32.120,0:03:35.440


0:03:35.440,0:03:37.570
And this is literally-- well,[br]there's two things.

0:03:37.570,0:03:41.190
There's a variable cost which[br]is, each widget, they might

0:03:41.190,0:03:44.800
have used some amount of metal[br]and some amount of energy to

0:03:44.800,0:03:47.540
produce it and some[br]amount of paint if

0:03:47.540,0:03:48.960
it's a painted widget.

0:03:48.960,0:03:51.490
And so that the cost of goods[br]is literally how much did it

0:03:51.490,0:03:54.680
cost to buy the metal and the[br]paint and provide the

0:03:54.680,0:03:59.000
electricity to make those $3[br]million worth of widgets.

0:03:59.000,0:04:00.820
That's the variable cost. And[br]then on top of that you have

0:04:00.820,0:04:03.500
the fixed costs, or the[br]relatively fixed costs, where

0:04:03.500,0:04:07.280
just to have the factory open,[br]it costs a certain amount of

0:04:07.280,0:04:09.960
money every year, regardless of[br]how many widgets you make.

0:04:09.960,0:04:11.960
And we'll go into more detail[br]on that, But for simplicity,

0:04:11.960,0:04:14.070
let's say all those costs[br]of making the

0:04:14.070,0:04:17.730
widgets were $1 million.

0:04:17.730,0:04:21.220
So sometimes someone might say[br]it's a $1 million cost. When I

0:04:21.220,0:04:23.870
make models, I like to put[br]a minus there, so that I

0:04:23.870,0:04:28.370
remember that that's a cost.[br]Anything that detracts from

0:04:28.370,0:04:29.550
income I put as a minus.

0:04:29.550,0:04:31.760
Anything that adds is a plus,[br]although that's not

0:04:31.760,0:04:33.430
necessarily the standard[br]convention.

0:04:33.430,0:04:36.820
Some people say, oh, it's a[br]positive $1 million cost,

0:04:36.820,0:04:37.920
which means you subtract.

0:04:37.920,0:04:40.730
But either way I think[br]you get the point.

0:04:40.730,0:04:46.430
And then if you subtract your[br]costs from your revenue, or if

0:04:46.430,0:04:48.280
you just add these two numbers,[br]because this one is

0:04:48.280,0:04:50.490
negative, you have your[br]gross profit.

0:04:50.490,0:04:58.980


0:04:58.980,0:05:00.900
And in this case, it would[br]be $2 million.

0:05:00.900,0:05:05.030


0:05:05.030,0:05:10.260
And this number tells you, how[br]much money did you make, or

0:05:10.260,0:05:12.350
how much profit did[br]you make just from

0:05:12.350,0:05:13.680
selling these widgets?

0:05:13.680,0:05:18.530
So the more widgets you sell,[br]in most circumstances, the

0:05:18.530,0:05:21.560
larger this number[br]is going to be.

0:05:21.560,0:05:26.720
So this is your profit before[br]all of the other expenses that

0:05:26.720,0:05:29.290
a company has to incur,[br]like the taxes

0:05:29.290,0:05:30.730
and the CEO's salary.

0:05:30.730,0:05:32.610
The CEO's salary doesn't[br]go in here, right?

0:05:32.610,0:05:38.890
Because the CEO doesn't go out[br]there to the factory in most

0:05:38.890,0:05:40.480
cases and actually help[br]make the widget.

0:05:40.480,0:05:43.610
So the CEO's salary or the[br]CFO's salary or the

0:05:43.610,0:05:46.160
headquarters in a nice[br]skyscraper, that doesn't get

0:05:46.160,0:05:47.140
factored in here.

0:05:47.140,0:05:48.620
Or the marketing[br]expense, right?

0:05:48.620,0:05:50.490
You have to tell people, hey,[br]we make good widgets.

0:05:50.490,0:05:52.240
So none of that is[br]factored in here.

0:05:52.240,0:05:53.680
So that goes into[br]the next line.

0:05:53.680,0:05:58.410
And oftentimes, you'll see it[br]broken up, where they'll have

0:05:58.410,0:05:59.660
marketing expense.

0:05:59.660,0:06:03.260


0:06:03.260,0:06:07.200
Sometimes you have to pay[br]salespeople, so you might have

0:06:07.200,0:06:12.380
sales expense, and then the[br]stuff like the corporate

0:06:12.380,0:06:15.500
office and the CEO's salary, and[br]you have to hire auditors

0:06:15.500,0:06:17.050
and accountants and[br]all of that.

0:06:17.050,0:06:19.130
That might be included[br]as general.

0:06:19.130,0:06:20.770
Actually, I should be doing this[br]in magenta because it's

0:06:20.770,0:06:22.300
all expenses.

0:06:22.300,0:06:25.900
Marketing, sales, and then[br]G&A you'll sometimes see.

0:06:25.900,0:06:26.790
Sometimes you'll see SG&A.

0:06:26.790,0:06:30.920
G&A just stands for general and[br]administrative expenses.

0:06:30.920,0:06:33.450
If you see SG&A-- sometimes[br]instead of that you'll see

0:06:33.450,0:06:37.420
SG&A-- that mean selling,[br]general and

0:06:37.420,0:06:38.580
administrative expenses.

0:06:38.580,0:06:41.920
Selling is things like, it could[br]be the commissions that

0:06:41.920,0:06:43.070
the salespeople get.

0:06:43.070,0:06:45.830
It could be just the cost of[br]having salespeople travel

0:06:45.830,0:06:49.060
around the country and taking[br]people out to steak dinners.

0:06:49.060,0:06:51.330
And then the general and[br]administrative, that's just

0:06:51.330,0:06:53.270
all the stuff that the corporate[br]office does, and all

0:06:53.270,0:06:55.110
the people who are[br]at that level.

0:06:55.110,0:06:57.380
So if you subtract these, and[br]I'm just making up these

0:06:57.380,0:07:00.120
numbers as I go.

0:07:00.120,0:07:05.220
Say, in marketing, the company[br]is spending $500,000.

0:07:05.220,0:07:07.280
And I'm putting it as a minus[br]because I like to remember

0:07:07.280,0:07:08.160
it's an expense.

0:07:08.160,0:07:10.180
Some models you'll[br]see, they'll say

0:07:10.180,0:07:12.340
it's $500,000 expense.

0:07:12.340,0:07:15.870
Sales, let's say, this[br]is just G&A here.

0:07:15.870,0:07:18.130
I want to make a separate[br]line for sales.

0:07:18.130,0:07:24.840
So let's say sales, selling[br]expenses is $200,000.

0:07:24.840,0:07:27.400
And let's say G&A, the corporate[br]offices and all of

0:07:27.400,0:07:33.840
that, let's see that's[br]another $300,000.

0:07:33.840,0:07:37.210
And now we're ready to figure[br]out how much money did the

0:07:37.210,0:07:39.610
operations of this[br]business make?

0:07:39.610,0:07:41.260
So this is operating profit.

0:07:41.260,0:07:45.250


0:07:45.250,0:07:47.500
This is really important to pay[br]attention to, because so

0:07:47.500,0:07:49.410
many people say, oh, a company[br]made this much.

0:07:49.410,0:07:51.940
And you'll hear these numbers,[br]gross and operating profit and

0:07:51.940,0:07:55.570
net profit and pretax profit,[br]and it's very hard to

0:07:55.570,0:07:57.890
understand that these are[br]actually very, very different

0:07:57.890,0:08:00.590
things, because they all have[br]the word "profit," and what

0:08:00.590,0:08:02.250
does gross and operating[br]and all that mean?

0:08:02.250,0:08:04.300
But here you see it means very,[br]very different things.

0:08:04.300,0:08:06.900
Let's calculate this number[br]first before I go off on one

0:08:06.900,0:08:09.110
of my tangents on all the[br]differences between the

0:08:09.110,0:08:10.460
operating and the[br]gross profit.

0:08:10.460,0:08:14.450
But let's see, 2 million[br]minus 1 million.

0:08:14.450,0:08:15.920
My head I think implicitly[br]made the

0:08:15.920,0:08:16.940
numbers work out nicely.

0:08:16.940,0:08:23.030
So my operating profit[br]here is $1 million.

0:08:23.030,0:08:25.830
So already we have some[br]new nuance on profit.

0:08:25.830,0:08:30.150
I made $2 million just from[br]actual widget sales, but then

0:08:30.150,0:08:32.520
when you take out all of the[br]overhead of the company, the

0:08:32.520,0:08:35.210
marketing, the sales, the[br]general and administrative

0:08:35.210,0:08:38.030
expenses, I'm only left[br]with $1 million.

0:08:38.030,0:08:41.610
And this is the profit from the[br]operations of the company,

0:08:41.610,0:08:44.390
or you could say from the assets[br]or from the business or

0:08:44.390,0:08:45.920
from the enterprise[br]of the company.

0:08:45.920,0:08:47.500
That's what it is generating.

0:08:47.500,0:08:49.890
But we can see-- I've drawn a[br]bunch of balance sheets before

0:08:49.890,0:08:54.410
and I think this is a good time[br]to draw a balance sheet.

0:08:54.410,0:08:58.390
So you have kind of the[br]assets of a company.

0:08:58.390,0:09:00.570
And we'll talk a little bit[br]more about assets and

0:09:00.570,0:09:03.460
enterprise value, and there's[br]a little bit of a nuance

0:09:03.460,0:09:05.800
there, but essentially[br]the company itself.

0:09:05.800,0:09:08.415
Before you think about how the[br]company is paid for or how

0:09:08.415,0:09:11.420
it's funded, if you just think[br]about the enterprise itself,

0:09:11.420,0:09:13.450
the assets.

0:09:13.450,0:09:16.980
The assets are generating[br]this.

0:09:16.980,0:09:19.660
They're generating the operating[br]profit, and that's a

0:09:19.660,0:09:22.400
very important thing to realize[br]in the future when we

0:09:22.400,0:09:23.590
talk about return on assets.

0:09:23.590,0:09:25.360
Actually, we could talk[br]about it now.

0:09:25.360,0:09:31.070
Let's say our assets, if we[br]paid $10 million for these

0:09:31.070,0:09:34.650
assets, and these assets-- this[br]is the income statement

0:09:34.650,0:09:38.410
for 2008-- are spitting out $1[br]million a year, or at least $1

0:09:38.410,0:09:41.390
million in this year, our return[br]on asset-- I wasn't

0:09:41.390,0:09:42.850
planning on introducing this,[br]but it doesn't hurt to

0:09:42.850,0:09:47.450
introduce it right now-- our[br]return on asset, often

0:09:47.450,0:09:53.530
acronymed ROA, would be-- well,[br]the numerator is the

0:09:53.530,0:09:57.485
return, which is $1 million.

0:09:57.485,0:10:01.240
The denominator is the[br]assets, $10 million.

0:10:01.240,0:10:04.660
So we got a 10% return[br]on our assets.

0:10:04.660,0:10:06.240
For a $10 million investment,[br]we're getting

0:10:06.240,0:10:07.090
$1 million a year.

0:10:07.090,0:10:11.580
We're getting 10% of our asset[br]investment back every year.

0:10:11.580,0:10:13.580
So that's a nice thing to keep[br]in the back of your mind, this

0:10:13.580,0:10:17.860
return on asset concept, and[br]it's very closely tied to

0:10:17.860,0:10:22.170
operating profits and the[br]actual assets of a firm.

0:10:22.170,0:10:23.970
What we've learned, and[br]especially if you watched some

0:10:23.970,0:10:26.880
of my other economics videos,[br]that all companies aren't

0:10:26.880,0:10:28.430
financed the same.

0:10:28.430,0:10:30.040
A lot of them might[br]have some debt.

0:10:30.040,0:10:33.670
So let's say that company had[br]$10 million of assets, but

0:10:33.670,0:10:37.380
let's say they paid for it[br]with $5 million of debt.

0:10:37.380,0:10:40.500


0:10:40.500,0:10:45.370
And let's say the interest rate[br]on that debt is-- let me

0:10:45.370,0:10:50.595
think of a good number-- 5%.

0:10:50.595,0:10:57.670


0:10:57.670,0:10:58.190
Let's make it easier.

0:10:58.190,0:11:00.720
Let's make it 10% interest.

0:11:00.720,0:11:02.240
So this is the operating[br]profit.

0:11:02.240,0:11:04.790
This is the money that just[br]comes out of the asset itself.

0:11:04.790,0:11:06.980
But, of course, that's not the[br]money that we get to take

0:11:06.980,0:11:09.090
home, because we have to pay[br]this interest. So let's throw

0:11:09.090,0:11:10.340
that in there as an expense.

0:11:10.340,0:11:13.475


0:11:13.475,0:11:14.320
Interest expense.

0:11:14.320,0:11:16.350
And obviously, a company that[br]has no debt will have no

0:11:16.350,0:11:18.540
interest expense, but[br]in this case, we do.

0:11:18.540,0:11:21.350
And this is an annual[br]income statement.

0:11:21.350,0:11:24.990
So let's see, if we have $5[br]million of debt, and we're

0:11:24.990,0:11:30.240
paying 10% on that, 10% of $5[br]million is $500,000 a year in

0:11:30.240,0:11:33.970
interest. So we have to[br]essentially take half of our

0:11:33.970,0:11:38.660
operating profit and give[br]it back to the bank.

0:11:38.660,0:11:43.150
And now we are left with our--[br]we're getting close to where

0:11:43.150,0:11:46.650
we need to get to--[br]pre-tax income.

0:11:46.650,0:11:51.370


0:11:51.370,0:11:58.060
And if we do the subtraction,[br]we're at $500,000.

0:11:58.060,0:11:59.950
And you could guess what the[br]next line is going to be,

0:11:59.950,0:12:01.290
given that this says pre-tax.

0:12:01.290,0:12:04.770
This is what the owners of the[br]company get before they pay

0:12:04.770,0:12:06.510
the government.

0:12:06.510,0:12:07.875
So you can guess what[br]the next line is.

0:12:07.875,0:12:09.125
It's going to be taxes.

0:12:09.125,0:12:11.500


0:12:11.500,0:12:15.760
Let's say that it's a 30%[br]corporate tax rate, and you're

0:12:15.760,0:12:19.020
going to take 30% of this[br]number right here.

0:12:19.020,0:12:20.520
30% of that number[br]right there.

0:12:20.520,0:12:28.580
So 30% of $500,000[br]is $150,000.

0:12:28.580,0:12:30.060
And then we are done.

0:12:30.060,0:12:33.020
We finally have paid off[br]everybody we need to pay off.

0:12:33.020,0:12:36.060
So we started off with[br]$3 million up here.

0:12:36.060,0:12:39.500
We kept paying a bunch of[br]expenses, and then now we're

0:12:39.500,0:12:40.650
left with what?

0:12:40.650,0:12:48.610
This is $350,000[br]of net income.

0:12:48.610,0:12:51.370


0:12:51.370,0:12:55.300
And this is what goes to the[br]owners of the company.

0:12:55.300,0:12:57.910
This net income right here.

0:12:57.910,0:13:01.000
So going back to our balance[br]sheet, we had a $10 million

0:13:01.000,0:13:03.540
asset, we had $5 million[br]of debt.

0:13:03.540,0:13:06.600
We know what's left over[br]is the equity.

0:13:06.600,0:13:09.640
So let me do that in[br]a vibrant color.

0:13:09.640,0:13:11.120
Equity is what's left over.

0:13:11.120,0:13:14.100
So let's say this is[br]all book value.

0:13:14.100,0:13:15.880
So we have $5 million[br]of equity.

0:13:15.880,0:13:18.430
And when I say book value,[br]that's just a fancy way of

0:13:18.430,0:13:21.810
saying this is what our[br]accountants say that we paid

0:13:21.810,0:13:22.830
for the stuff.

0:13:22.830,0:13:24.180
This is what we have[br]on our books.

0:13:24.180,0:13:26.920
And we'll talk later about[br]depreciation and amortization

0:13:26.920,0:13:30.620
and how we might change what[br]these values are, but a very

0:13:30.620,0:13:33.380
simple way is, if you went out[br]and bought $10 million worth

0:13:33.380,0:13:34.910
of stuff, you'd write on[br]your books, I have

0:13:34.910,0:13:36.250
a $10 million asset.

0:13:36.250,0:13:40.010
And if you took a $5 million[br]loan, then what you really

0:13:40.010,0:13:42.260
own, if you were to kind of sell[br]all of this, you would

0:13:42.260,0:13:46.955
get $5 million of equity.

0:13:46.955,0:13:48.890
And I think this is an[br]interesting thing.

0:13:48.890,0:13:51.630
When we did return on asset,[br]we looked at the operating

0:13:51.630,0:13:55.010
profit, because this is what our[br]company generated before

0:13:55.010,0:13:57.820
we paid the bank or Uncle Sam[br]or anything like that.

0:13:57.820,0:14:01.340
And so we took this number as[br]the numerator and we divided

0:14:01.340,0:14:02.840
by the number of assets.

0:14:02.840,0:14:06.285
Now we can do another notion,[br]and that's return on equity.

0:14:06.285,0:14:11.630


0:14:11.630,0:14:14.620
In return on equity, the[br]numerator is the net income

0:14:14.620,0:14:19.460
that we got, so it's $350,000.

0:14:19.460,0:14:23.120
And the denominator here is the[br]equity, the book value of

0:14:23.120,0:14:26.040
our equity, so that's[br]$5 million.

0:14:26.040,0:14:27.300
One, two, three.

0:14:27.300,0:14:28.200
One, two, three.

0:14:28.200,0:14:30.250
Let's cancel some zeroes out.

0:14:30.250,0:14:33.380
So it's like 35/500.

0:14:33.380,0:14:38.230
35/500 is the same thing[br]is 7/100, so it equals

0:14:38.230,0:14:42.460
7% return on equity.

0:14:42.460,0:14:44.650
And that's interesting because,[br]well, why that's

0:14:44.650,0:14:48.780
lower is-- well, I don't want[br]to go into too much depth

0:14:48.780,0:14:51.330
because I realize I'm already[br]pushing my time limit.

0:14:51.330,0:14:53.730
But at this point, you should[br]have a good understanding of

0:14:53.730,0:14:57.720
at least a basic income[br]statement of a company that

0:14:57.720,0:14:58.420
sells widgets.

0:14:58.420,0:15:00.010
And in the future, we're gonna[br]look at a lot of different

0:15:00.010,0:15:01.830
companies, financial companies,[br]insurance

0:15:01.830,0:15:05.650
companies, natural gas pipeline[br]companies, that will

0:15:05.650,0:15:08.100
have very different-looking[br]income statements, but this

0:15:08.100,0:15:10.210
gives you the general template[br]for how things work.

0:15:10.210,0:15:13.920
And at least it'll give you a[br]sense of how revenues, gross

0:15:13.920,0:15:17.300
profit, operating profit,[br]pre-tax income and net income

0:15:17.300,0:15:18.570
really are different.

0:15:18.570,0:15:19.960
A lot of times in the[br]popular press.

0:15:19.960,0:15:22.940
They're all jumbled up as just[br]kind of the company is making

0:15:22.940,0:15:23.930
this much money.

0:15:23.930,0:15:26.490
Anyway, I'll see you[br]in the next video.

0:15:26.490,0:15:26.500