I am a medical student and recently an MBA student to learn about finance. This is the first time I actually wanna learn finance after starting the course, because it was simply so boring to a medical student like me and made absolutely no sense. Now it does, THANKYOU! GOnna watch the rest of your economics videos::)
That is one of the definitions. The standard formula takes out the effect of interest and tax savings from interest and is (net income + interest - tax savings from interest)/Assets which is essentially saying how much earnings would I have if I weren't paying debt. If you wanted a pre-tax ROA than you could just add back interest and taxes and divide by Assets (or EBIT/Assets which is, for the purposes of this examples, the same as Op profit/Assets
awesome dude!!!, writing my exam tomorrow and they better not bring up the income statement because imma bowl it out like a boss after this video!!!#fFromSouthAfrica
Thank you! so much for all your teachings.I am able to learn financial statements better! than any regular class teachings. Thank you soo much, God bless u and u r family
Thank you Mr. Khan, these videos are going to allow people to understand this information and get in a game that they have been on the tail end of. Thank you, thank you, thank you. Many blessings to you and your family.
That you so much for this video. I am currently registered in a finance class, and This is just what i needed to brush up on my accounting. very well explained, and easy to understand.
Thanks so much for your amazing explanation for us. I can learn income statement better than before. In the class I really difficult to caught up a lesson with professor and I also can not understanding some point, but now I can understand 50% of it and I also learn to do some exercise too. ❤️😅
yesss...very outstanding explanation...helping to understand all of those subject that makes me suck,but now i start to like it...you are amazing mr khan, i hope my real lecturer in campusis you sir...salute from indonesia
Excellent presentation about an income statement, which may also be known as a profit and loss statement. This is one of the most basic accounting documents, but it is also one of the most used financial reports.
I loved your video on the usefulness of the balance sheet. I love roi roa... And how liquid is the company. I have an MBA in 2011. But my depression has kept me low and it's very hard to sell my skills in job interviews. I have watched 25 videos of yours in this series so far. If it was not for my depression...I'd teach accounting!
Not trying to dis. This guy is amazing and I learn from him everyday. But just to put my .2 out there. ROA is Net income divided by Total Assets. Just for all the people to know, one must account for Continuing Operations and Non-Recurring events to get the total net income. The example above, though perfect for covering the basics, is assuming that the operating profit is the net income to get the ROA.
You are really helping me to understand the things i did not understand befor...lol. I have a question and maybe you can help me with this.. I buy Merch.. from a wholesaler out of California. When I recieve my merch... and the invoice from the wholesaler there is a Freight charge. When i do my Quarterly Taxes, do i include the freight charges? Or is it a deduction?
Question: where would you find the figure for the company's total assets inside their financial statements (i.e. income state., balance sheet, cash flow statement, etc.)?
Great videos, thank you. Question: You explained ROA = 1M/10M=10% in which $1M came from Operating Profit. I thought it should be Net Income, which is $350,000. Please explain since I am confused! Thanks
Hey Sal - Thanks for making these videos..Quick question - you said that ROA = Operating profit/Total asset value....I thought it was Net Income/Total Asset Value? PLEASE confirm this..Thanks!
Maybe a little to much detail, or maybe it is just a difference between US and Sweden (since we have all these nice taxes here...), but when I did this at university you would always try to max out write downs on assets to minimize pre tax income to minimize the taxes you pay. Of course, this is bad for share holders, since it would make the company look worse of then it really is.
travel bug That's what happens when we spend our free time reading books and watching educational videos instead of playing video games and watching Netflix :)
I'm doing this alongside a live company that I'm looking at and some of these numbers aren't adding up. This company I'm looking at has 230 million revenue. Gross income is 27.97 million. And the operating income is 50 million. I'm missing something. I don't understand how operating income is more than gross income.
all this seems complicated to start this grand scale of a business down to only getting few thousand dollars income. on the other hand you have people shooting a ball in ring and gets paid millions of dollars a year. oh the world is not fair!
@Ren1026cbcc Sales are NOT taxed. Only pre tax income is taxed, which should be one of your last numbers on your income statement before calculating tax. All of those expenses like cost of goods sold, interest expense, marketing expenses reduces your taxable income. If you were to tax sales @ 30% it would be $900,000 of tax. This wouldn't make any sense right? Because the cost of all the goods you produced is $1,000,000. Always make sure that the numbers make sense!
I am a medical student and recently an MBA student to learn about finance. This is the first time I actually wanna learn finance after starting the course, because it was simply so boring to a medical student like me and made absolutely no sense. Now it does, THANKYOU! GOnna watch the rest of your economics videos::)
That is one of the definitions. The standard formula takes out the effect of interest and tax savings from interest and is (net income + interest - tax savings from interest)/Assets which is essentially saying how much earnings would I have if I weren't paying debt. If you wanted a pre-tax ROA than you could just add back interest and taxes and divide by Assets (or EBIT/Assets which is, for the purposes of this examples, the same as Op profit/Assets
You have saved my life! i have a huge business studies booklet due and i couldn't finish it without doing this and i did it!!! thankyou xxx
awesome dude!!!, writing my exam tomorrow and they better not bring up the income statement because imma bowl it out like a boss after this video!!!#fFromSouthAfrica
My accounts teacher is wack and i never understand what he teaches
But when i come to your channel it makes it so better.
Thank you.❤
Thank you! so much for all your teachings.I am able to learn financial statements better! than any regular class teachings. Thank you soo much, God bless u and u r family
Thank you Mr. Khan, these videos are going to allow people to understand this information and get in a game that they have been on the tail end of. Thank you, thank you, thank you. Many blessings to you and your family.
That you so much for this video. I am currently registered in a finance class, and This is just what i needed to brush up on my accounting. very well explained, and easy to understand.
Giiiiiiiiiiirrrrrllllll
Teeybabyboo exact same for me
hey
Thank you for explaining accounting to a marketing person in very simple terms....I've been struggling with my lecturer!
im in grade 7 in 2016 and it helps a lot with my entrepreneurs' day
Your channel is an incredible resource. Thank you!
Thanks so much for your amazing explanation for us. I can learn income statement better than before. In the class I really difficult to caught up a lesson with professor and I also can not understanding some point, but now I can understand 50% of it and I also learn to do some exercise too. ❤️😅
yesss...very outstanding explanation...helping to understand all of those subject that makes me suck,but now i start to like it...you are amazing mr khan, i hope my real lecturer in campusis you sir...salute from indonesia
i just want to say I find you to be a very inspiring man and look forward to volunteering on your site as a translator.
Every time when you repeact these things, learn something new. Thanks for explanning in such an easy way.
Excellent presentation about an income statement, which may also be known as a profit and loss statement. This is one of the most basic accounting documents, but it is also one of the most used financial reports.
Thanks so much! I finally understand what is ROA and ROE!
well explained, thanks Khan :)
He explains everything! From cells, to atoms, to finance.
You're the man Khan
I thought about khan's academy while watching this video and saw channel name after it, omg it's khan's academy video ! awesome.
Thanks for your teaching. It's really easy to understand. Wish you all the best
I loved your video on the usefulness of the balance sheet. I love roi roa...
And how liquid is the company.
I have an MBA in 2011. But my depression has kept me low and it's very hard to sell my skills in job interviews. I have watched 25 videos of yours in this series so far. If it was not for my depression...I'd teach accounting!
Great slow explanation. Thank you. Very nice to have information like this available.
This was a really good video tutorial! Thanks Man!
@khanacademy thankyou very much..apecial thanks to Mr. Salman Khan...
I'm passing my quiz tomorrow! Thanks so much for this tutorial!
Did u pass??? Lol
Damn fam, straight up you a G! Probably best explanation online! real talk, 100.
This is very helpful, thank you very much indeed!
HI Sal Your videos are really Usefull.
Thanks Indeed
Chirag Ali
Why can't my lecturer explain it like this!!!! Thanks, you're the best!
Great way of teaching this. Thanks!
Great video! I'm feeling more confident. Thanks you!
Thank you so much for your explanation.
Thanks Sal for these videos.
Thank you! It's very clear.
I have my final tomorrow and now I'm much more confident taking it
My goodness you're a good teacher
Not trying to dis. This guy is amazing and I learn from him everyday. But just to put my .2 out there. ROA is Net income divided by Total Assets. Just for all the people to know, one must account for Continuing Operations and Non-Recurring events to get the total net income. The example above, though perfect for covering the basics, is assuming that the operating profit is the net income to get the ROA.
Thank youu so much I understand it better now
not what I needed but u r still quite smart .
Income Statement/Balance Sheet/Cash Flow Statement/G&A/SG&A/Cost of Goods Sold/Marketing/Sales/Gross Profit/Operating Profit/Enterprise Value/Return on Asset/ROA/Pre-tax Income/Net Income/Depreciation/Amortization/Return on Equity/ROE/Variable Cost/Fixed Cost/Sales People/Auditor/plain vanilla/jumble up/nuance/detract/
This could be the most useful video for start up's.
This is gold!
Interesting way to abbord concepts of financial statements. I could say that im known more about this area.
Damn Accounting professor. You're my man!
very helpful for me in a accounting college
this was very helpful, thanks a lot
Giiiiiiiiiiiirrrrlll
Just what u needed!! Thanks a lot :)
+Faiza Ismail lol u? or "i"
+Linda A true I* lol :'D
+Linda A true I* lol :'D
Beautiful!!
You are really helping me to understand the things i did not understand befor...lol. I have a question and maybe you can help me with this.. I buy Merch.. from a wholesaler out of California. When I recieve my merch... and the invoice from the wholesaler there is a Freight charge. When i do my Quarterly Taxes, do i include the freight charges? Or is it a deduction?
thanks man.. i like your stuff...
Nice help, thank you!!!!
HI SAL! Thanks.
Thanks for the video.
better than my accounts proffessor!!!!!!!!!!!!
Question: where would you find the figure for the company's total assets inside their financial statements (i.e. income state., balance sheet, cash flow statement, etc.)?
very well explained
Thank you very much :)
Great videos, thank you. Question: You explained ROA = 1M/10M=10% in which $1M came from Operating Profit. I thought it should be Net Income, which is $350,000. Please explain since I am confused! Thanks
In real estate operating profit will bet the same thing as net operating income (NOI). Expect that taxes is included included.
Awesome!!
this is great...thank you.
Hey Sal - Thanks for making these videos..Quick question - you said that ROA = Operating profit/Total asset value....I thought it was Net Income/Total Asset Value? PLEASE confirm this..Thanks!
helpfull. thank you
:) Easy to understand video
Khan :) thank you
very concise.
Yea, thx man, helpful stuff!
hi, i want to know what is the next video i would see after price and market capitalization.
thankyou so much!!
Dude, you rock
Legend!
Thank you
Excellent, just one question though, whats a widgit?
Maybe a little to much detail, or maybe it is just a difference between US and Sweden (since we have all these nice taxes here...), but when I did this at university you would always try to max out write downs on assets to minimize pre tax income to minimize the taxes you pay. Of course, this is bad for share holders, since it would make the company look worse of then it really is.
is the interest actual interest or interest + principle? like from a mortgage payment?
Are wages a part of SG&A?
Is there anything you can't explain? I wish I had such a broad knowledge of so many different topics.
travel bug That's what happens when we spend our free time reading books and watching educational videos instead of playing video games and watching Netflix :)
the best!!!!!!!!!!!
you r right .
Is the ROA = net income / asset? In your example it's operating profit / asset.
Is CapEX included in COGS?
Assuming that payroll for ALL employees is included and not just sales people right?
i have this same question. where would all salaries located in?
thanks broo
Why is return on assets based off the operating profit and not the net income?
Great question, was thinking about the same
better than our doctor
It's that easy! :O
I know you have posted this long ago but i hope you still check the comments as i wanna say it feels like having a private tutor , Thaaaaaaaaaank you
Is Operating profit same as EBITDA?
Revenues minus cost of doing business is income.
ROA really isn't generally based on operating profit. almost everyone uses net income as a general rule.
plz correct me if I am wrong but ROA is net income divided by total assets not operating profit divided by total assets
Hi Sal, I think there is a mistake here in this video about the ROE & ROA defination. The ROE is 350K/5m = 7% and the ROA is 350K/10m = 3.5%
I'm doing this alongside a live company that I'm looking at and some of these numbers aren't adding up.
This company I'm looking at has 230 million revenue. Gross income is 27.97 million. And the operating income is 50 million. I'm missing something. I don't understand how operating income is more than gross income.
Where is assets depreciation in costs of Income statement ?
all this seems complicated to start this grand scale of a business down to only getting few thousand dollars income. on the other hand you have people shooting a ball in ring and gets paid millions of dollars a year. oh the world is not fair!
statement of changes in equity!!!
@Ren1026cbcc Sales are NOT taxed. Only pre tax income is taxed, which should be one of your last numbers on your income statement before calculating tax. All of those expenses like cost of goods sold, interest expense, marketing expenses reduces your taxable income. If you were to tax sales @ 30% it would be $900,000 of tax. This wouldn't make any sense right? Because the cost of all the goods you produced is $1,000,000.
Always make sure that the numbers make sense!
hahaha, nailed it!
Imagine owning a business that does 5 mil in sales, but only profits 350k.
Sheesh
You didnt subtract debt anywhere. Shouldnt we subtract "debt + interest" from operating income??