Non operating income.

And I won't go into all of the details of an income statement, but any income statement you look at will have this operating profit line.

In this scenario, this is the income statement, at least as far as we get to the operating income line.

It could be a quarterly income statement.

And this is an annual income statement.

let's do the accrual accounting income statement.

So these assets might be generating non operating income.

Then whatever this generates is actually non operating income.

So it could be an annual income statement.

So this kind of the cash income statement,

It's the top line of the income statement.

But this is the difference between operating income and EBlT.

Because some of income might be generated from non operating assets.

And in all these scenarios it tells me my operating income.

So this right here you could view as our income statement.

EBlT in this case would be the operating profit plus this investment income.

But in general if you take EBlT and you take out the non operating income, you get back to operating profits.

And then also how the income statement relates to the balance sheet.

And your bottom line, that's the bottom line of the income statement.

And I'll show you how to do that on an income statement.

And here we'll literally just take whatever is reported from the income statement.

And at least it'll give you a sense of how revenues, gross profit, operating profit, pre tax income and net income really are different.

I have all of this overhead expense and often times, on a regular income statement, it will be called selling, general and administrative, or overhead costs, or operating costs or something like that.

In particular, you saw interest expense on Jason's business and not on Ben's income statement.

And so their operating profit, the amount of pre tax income, but you know, we're not considering financing either, so this is their operating profit or their EBlT.

And income statement tells us what happened over a period of time, what was the activity?

This is our income statement for month one on a Cash basis and a Accurual basis

Above this line right over here is the income statement, down here is the balance sheet.

Operating System

Operating system

I must have gotten 200 worth of value from someplace and that's what the income statement describes.

So I'm gonna start of, we're gonna focus on month 2 and what I've done is I've rewritten some of this accrual income statement down here so it really looks like a statement so this right here is the income statement for month 2 on an accrual basis.

So it's 50 utilization and then, my return on asset is my operating income divided by my initial investment, right?

And actually, in this video, we're going to see how the income statement relates to the balance sheet.

Now I say it's simplified because this is a very simplified income statement for each of these periods.

So operating profit.

I see the memory operating, I see the CPU operating,

I hear it operating. I probably smell it operating. (Laughter)

statement

Statement

And we'll learn later the cash flow statement essentially reconciles the income statement with what happens with your actual cash account, or how things actually move within the balance sheet.

So EBlT, in the case that I just added some investment income, would be 1,010,000, while operating profit would be 1 million.

This is the cash basis of accounting and this is the accrual, and let's just look at the income statement

In the next video, I'll try to reconcile what the Accrual income statement is telling us and the actual cash.

What we did in the first video on this series is we just did one snapshot of the income statement.