Original subtitles

So let's go ahead and create a profit and loss statement for Ricard.

Since we Ricard is a service company,

I've included expenses that are typical service company and sales company would incur.

If this was a manufacturing company,

some of the expenses that are missing in here would be

the cost of the raw materials that you need to make your product.

Let's get started. So, cost of goods sold would be the sum of these expenses.

The engineering costs for hosting the websites,

for the charges for the payment system,

packaging, and delivery costs.

So, I'll going ahead and added those up and that gives me the cost of goods sold.

It's important to remember that your P and L statement and what goes into

each line item changes by the type of business you are working with.

Again, if you're curious about it,

feel free to check out the links below. All right.

Moving on, our gross profit is our revenue minus cost of goods sold,

and our selling general and administrative expenses are the salaries,

legals fees, rent for office and utilities.

This will be sum of these numbers.

To get the total operating expenses,

I'm going to add in the recent development expenses as well.

So, this will be sum of this and this SGAs.

So, to arrive at EBIT or earnings before interest and tax or operating profit or income,

these are all synonymous for the same word,

you have to subtract the total operating expenses from the gross profit.

Then, finally, to arrive at our net income or net profit,

you need to subtract from your EBIT or

operating profit the sum of your interest expenses and the income tax,

and so we arrive at our net income.

So, that's a profit and loss statement.

You started with the total revenue,

took out the expenses of building the products,

which in the case of the Ricard here,

it's a SaaS company,

I'm included the services cost as well.

For a manufacturing company,

this would include the cost of raw materials,

got the gross profit.

Then I took out the overhead expenses as a selling general and administrative expenses,

and then added the R and D expenses to get the total operating expenses,

then took out and used gross profit to take out

the total operating expenses and got my EBIT or operating profit.

Then, finally, the interest expenses and income tax are taken out to get your net income.