So operating profit.

So their operating profit.

This was operating profit.

So this is operating profit.

Let's compare EBlT to operating profit.

And this is called operating profit.

So my operating profit here is 1 million.

It's from the business itself, operating profit, and since these are identical businesses, they have the same exact operating profit.

And that's how much operating profit my widget company has produced.

They're the things that are needed to generate the operating profit.

So if my operating profit is zero, we know my overhead.

So my operating profit is really my profit because I don't have to pay taxes on it.

You add the profit to the depreciation, you get a 50,000 operating profit same as the previous year.

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.

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

While operating profit, you start at the top line and you go down.

And you'll hear these numbers, gross and operating profit and net profit and pretax profit, and it's very hard to understand that these are actually very, very different things, because they all have the word profit, and what does gross and operating and all that mean?

And then the very first definition I gave you was operating profit over assets.

That's 500,000 a year. So my operating profit is 500,000 and that's pretty good.

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.

And the reason why there's a different term is, sometimes you can have the non operating profit.

ROA, I would say it's EBlT over assets, which is very close to operating profit over assets.

And the way we saw that is that, their everything, their revenue, gross profit all the way down to their operating profit was exactly the same.

So this is the operating profit. This is the money that just comes out of the asset itself.

So we have to essentially take half of our operating profit and give it back to the bank.

And we add back the interest, at least in this example, we get to an operating profit number.

Operating System

Operating system

So let's say I just want to know what has to happen for my operating profit to be zero.

Non operating income.

And then their pre tax profit is going to be the same thing as the operating profit, so minus 100,000, minus 100,000, 400,000 I'll make the good years in green 400,000.

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

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

So you might say, why is there a different term EBlT instead of, why don't people just always use operating profit?

I didn't want to go there in the first video, and that's why I just said operating profit divided by assets.

And so you can already imagine that both EBlT and the way I defined it initially, operating profit divided by assets.

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

Because it tells you either how much operating profit is being generated from here, or it could tell you how much EBlT.

So essentially my operating profit divided by my initial investment, depending on the different prices I might charge and the different quantities.

People, service, profit.

Choose Your Operating System

RPC Modern operating systems

RAP Older operating systems

RANDALL Operating right now.

What's your operating number?