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EBIT and EBITDA explained simply
 
06:19
What do EBIT and EBITDA mean? How to calculate EBIT and EBITDA? Why are the financial metrics EBIT and EBITDA important to measure the financial success of a company? Why do some companies use EBIT (Earnings Before Interest and Taxes) and others EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)? What is the purpose of the financial statements of a company: income statement, balance sheet, and cash flow statement? What are EBIT and EBITDA used for in business? Both EBIT and EBITDA are measures of profitability, along with terms like gross profit and net income. They are reported in the income statement (or "Profit & Loss statement", "P&L"), an overview of the profit or income that you generate during a period. To calculate EBIT and EBITDA, many companies would present their income statement in the following way: Revenue minus Cost Of Sales equals Gross Profit. Gross Profit minus S,G&A and R&D equals EBITDA. EBITDA minus Depreciation & Amortization equals EBIT. EBIT minus Interest and Taxes equals Net Income. Please be aware that different companies use different terminology, so what you see here might be different from what your company is using. EBIT is Earnings Before Interest and Taxes. Interest is excluded, as it depends on your financing structure. How much did you borrow, and at what interest rate? Taxes are excluded, because it depends on the geographies that you work in. EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization. Just like EBIT, it excludes Interest and Taxes. Furthermore, depreciation and amortization are excluded, because they depend on the historical investment decisions that a company has made, not the current operating performance. EBITDA is a meaningful metric for capital-intensive industries. In the video, we look at an example of using EBIT and EBITDA in financial reporting, by reviewing the 2015 annual report of the Maersk Group (CPH: MAERSK-B), a company headquartered in Denmark and operating globally. What do business and finance people use EBITDA for? Besides being a metric to represent ongoing operating performance, it is often mentioned as part of M&A (or Mergers & Acquisitions) news. A quick-and-dirty way to calculate the value of a company is by using a multiple of EBITDA. This can help you to get to a ballpark number, but I would advise to always do a more thorough analysis and a more thorough valuation of a company, as there are a lot of “ifs” connected to using an EBITDA multiple… you are assuming the profitability and the industry does not change, you exclude the impact of working capital (which could go up dramatically for a fast-growing company), and you exclude the cash that you need for capital expenditures on an ongoing basis for the company. Related videos in the Finance Storyteller series: EBITDA example https://www.youtube.com/watch?v=7e_6qEo1grI SG&A Selling General and Administrative expenses: https://www.youtube.com/watch?v=5S9xjBXx5v0 Depreciation: https://www.youtube.com/watch?v=6SY8s1_OEro EPS Earnings Per Share: https://www.youtube.com/watch?v=TXjkQy5KJog Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Views: 137651 The Finance Storyteller
EBITDA example
 
02:34
How to calculate EBITDA? In this short video, we will walk through the EBITDA definition and an example of two ways to calculate EBITDA for Verizon (NYSE: VZ). EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization. The EBITDA calculation in method 1 is from the top down, start with revenue and make your way down through Gross Margin to EBITDA. The EBITDA calculation in method 2 is slightly shorter, you start with Operating Income and work your way up. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Margin versus Markup
 
03:21
Profit margin versus profit markup, or margin on selling versus markup on cost, is a distinction that is often misunderstood by small business owners, contractors, consultants, as well as employees in large corporations. With painful consequences! Margin versus markup is a fundamentally different approach to pricing and profitability. Let me walk you through the calculations and the underlying thinking. If you like my story and the explanation is helpful, then please press the like button below the video. Margin is profit divided by revenue, and markup is profit divided by cost. As an example, let’s take a revenue for your product or service of $100, a cost of $80, and a profit of $20. In both the margin and the markup calculation, the profit of $20 is the numerator in the equation. However, what you take as the denominator is different! When you calculate margin, you divide profit by revenue. When you calculate markup, you divide profit by cost. So for margin, we take $20 profit divided by $100 in revenue which equals 20%. For markup, we take $20 profit divided by $80 cost, which is a 25% markup. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
DuPont analysis explained
 
06:20
DuPont equation tutorial. ROE: Return On Equity. ROA: Return On Assets. ROS: Return On Sales. This video takes you through the financial ratios of the ROE formula, the ROA formula, the ROS formula, asset turnover and leverage, and shows how they fit together. The very basics and the very essence of financial ratio analysis! ROE or Return On Equity is defined as Net Income divided by Equity. In other words, the net profit that a company has generated during a year, divided by the book value of the shareholder capital invested in the company. ROE is a measure of the rate of return to shareholders. The 3-part version of the DuPont analysis shows you that ROE = ROS x asset turnover x leverage. The first two elements together, ROS multiplied by Asset Turnover, form ROA, Return On Assets. This ratio of ROA has many variations, some companies measure ROIC Return On Invested Capital, ROTC Return On Total Capital, ROCE Return On Capital Employed, or RONOA Return On Net Operating Assets. These are all variations on the same theme, you look at the returns (profit) generated during a period, and compared them to the capital invested in the company to generate those returns. ROA is an indicator of business success, influenced by two factors: ROS or margin performance, and asset turnover which you could call speed or velocity. ROS or Return On Sales, is Net Income divided by Sales, which is an indicator of the relative profitability or operating efficiency: how many cents of profit are generated for every dollar of sales? Asset Turnover is calculated as Sales divided by Assets, a measure of asset use efficiency. The last element of the DuPont 3-part equation is leverage, Assets divided by Equity. You can expand the DuPont formula to 5 steps, if you want even more analytical insight into the drivers of where your ROE increase or decrease is coming from. The two elements on the right stay the same: asset turnover and leverage. However, ROS gets split into three elements: Net Income divided by Earnings Before Tax, which is called tax burden, Earnings Before Tax divided by EBIT, called interest burden, and EBIT divided by sales, which is EBIT%. In a lot of companies, improving the EBIT% and increasing the Asset Turnover, are important targets for the management team, whereas the other elements are for the finance, treasury and tax departments to manage. For an illustration of Return On Assets, my follow-up video analyzing ROA, ROS and asset turnover of Verizon and Walmart is highly recommended https://www.youtube.com/watch?v=2j8bfR8KqJ0 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Deferred tax assets explained
 
04:57
What are deferred tax assets? When and how do deferred tax assets occur, and how do you account for deferred tax assets? Which type of items create deferred tax assets? What is a Deferred Tax Asset impairment? All of this and more is covered in this short video. With a term like deferred tax assets, the first logical step to take is to look at the meaning of each of the words. Tax indicates that we are dealing with the topic of taxation. Deferred means that something has been postponed, and assets means that we own it, we have ownership. Keep that in mind when we explore deferred tax assets in more depth. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
CapEx vs OpEx explanation
 
07:20
CapEx versus OpEx. Capital Expenditures versus Operating Expenditures. There is a finance and accounting aspect to the terms CapEx and Opex, as well as a business model aspect. Let’s discuss both, and walk through some examples of how the terms CapEx and OpEx are used. CapEx is Capital Expenditures. OpEx is Operating Expenditures. What these terms have in common is the word expenditures, you are spending money, but in different ways. Capital Expenditures. As a working definition of CapEx, this is money spent by a business or organization to acquire or upgrade fixed assets, such as buildings, machines and equipment. Operating Expenditures. If CapEx is the upfront investment to buy a fixed asset, then a working definition of OpEx is the ongoing spending to keep the fixed asset running. For an expenditure to be considered as CapEx, you have to own an asset. There is a threshold level for expenditures to qualify as CapEx: there must be a useful life of more than one year, and the asset value must be more than a minimum amount. I have worked with a company where this minimum was $2500, and others where it was $7000. Please check with the finance department of your company on what your minimum level is. How about that part of maintenance where you are improving the performance of a machine and increase its capacity? What about software developed for internal use? What about the development phase of R&D? You could argue in all three cases that future economic benefits are generated by these projects, and according to the matching principle in finance it would be appropriate to capitalize these costs, and subsequently depreciate or amortize these assets over their useful life. Each of these cases will have to be evaluated carefully against current US GAAP or IFRS rules (depending on where your company is listed), and you will have to meet very strict criteria to apply a CapEx treatment. How does CapEx affect the financial statements? Let’s take a look at the balance sheet, the income statement and the cash flow statement, when we answer the question “does this expenditure qualify for CapEx (it meets the capitalization criteria) or it does not qualify as CapEx?”. First of all, the CapEx spend is a cash outflow recorded in “Cash From Investing Activities”. On the balance sheet, it gets accounted for as an asset, in the Plant and Equipment category. Over the years of its useful life, the asset gets depreciated, and the depreciation charge hits the income statement or P&L in each of the years of the assets’ economic life. I will link to my video about deprecation if you are interested in learning how that works: https://www.youtube.com/watch?v=6SY8s1_OEro Do you go for the upfront CapEx investment to own servers for your datacenter, where you are unsure how much capacity you will actually need, or do you pay a monthly OpEx fee for an external cloud service where it’s pretty much “pay as you go” and “spend what you use”? I can’t give you a “one size fits all” answer to this question, it’s really something that an IT manager and a finance manager should analyze together. Risk and scale should be part of this conversation. The evaluation is a variation of the age-old “own versus use”, “buy versus rent”, “buy versus lease” discussion, which is more relevant than ever before in these days of ubiquitous digital devices and tools, disruption of mobility models through Uber and others, and disruption of the travel and leisure models through Airbnb. This video discusses the impact of CapEx versus OpEx on the balance sheet, income statement, and cash flow statement, as well as ratios such as ROA. For more information on ROA and DuPont analysis, watch https://www.youtube.com/watch?v=bhbDDSohJ84 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Earnings Per Share explained
 
02:54
Earnings Per Share, or EPS. How do I calculate EPS? EPS definition, and EPS example. What is the difference between basic EPS and diluted EPS? Is EPS the same as dividend per share? These are the questions we will look at in this Finance Storyteller video, using the EPS of Apple (NASDAQ: AAPL) as an example. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
NPV and IRR explained
 
06:48
Net Present Value and Internal Rate of Return, in short NPV and IRR. What is the purpose of the NPV and IRR methods of investment analysis, and how do you calculate NPV and IRR? The main idea of Net Present Value is very simple: time is money! The net present value (or “discounted cash flow”) method takes the time value of money into account, by: - Translating all future cash flows into today’s money - Adding up today’s investment and the present values of all future cash flows If the net present value of a project is positive, then it is worth pursuing, as it creates value for the company. IRR is the discount rate at which the net present value becomes 0. In other words, you solve for IRR by setting NPV at 0. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
How to read an annual report
 
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How to read a company's annual report? This is a quick tutorial that covers my approach to understand annual reports, which is part of what I do for a living as a Finance Storyteller. By no means do I claim that a short tutorial on annual reports offers a comprehensive overview, but I do hope I can help you get started on your journey! I would love to hear about your experiences of reading an annual report in the comments below. Recommend viewing as next steps after this video: How to read an income statement (Alphabet Inc 2017): https://www.youtube.com/watch?v=ToE-oggQiqQ&list=PLKbmcnUUQMllEvFvqN-AIcXt8dj6LH-IQ&index=2 How to read a cash flow statement (Alphabet Inc 2017): https://www.youtube.com/watch?v=koOdj6wRJ9M&list=PLKbmcnUUQMllEvFvqN-AIcXt8dj6LH-IQ&index=3 How to read a balance sheet (Alphabet Inc 2017): https://www.youtube.com/watch?v=XKSOswE-_6c&list=PLKbmcnUUQMllEvFvqN-AIcXt8dj6LH-IQ&index=4 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Accounts Receivable and Accounts Payable
 
04:25
What do the financial terms accounts receivable and accounts payable mean? This video covers the definitions of accounts receivable and accounts payable, where you can find accounts receivable and accounts payable in the financial statements, and how the journal entries work for accounts receivable and accounts payable. Related videos: T-accounting for a sales transaction https://www.youtube.com/watch?v=ioNZy80xx9c Profit versus cash flow: https://www.youtube.com/watch?v=SX6tDy7YPgc Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Dividend Yield explained
 
06:40
Before you invest in high dividend yield stocks, it is important to understand the dividend yield formula, but also to have an idea of the risks of only looking at dividend yield. How to calculate dividend yield, and how to use dividend yield? Watch the whole video to see both the pros and the cons of dividend yield. Examples of industries where dividend traditionally has been high are oil, commercial real estate and telecom. In the current low interest rate environment, you make very little return putting your money in a savings account or treasury bonds. That’s why many investors turn to high dividend industries with relatively low share price volatility to invest. A cash dividend is a cash payment from a company to its shareholders. Let’s look at the dividend for two companies in the telecom industry: AT&T (NYSE: T) and Verizon (NYSE: VZ). The formula for dividend yield is annual dividend divided by the share price. AT&T has an annual dividend of $1.96 and a closing share price per April 5th 2017 of $41.02. AT&T’s dividend yield is therefore 4.8%. Verizon has an annual dividend of $2.31 and a closing share price per April 5th 2017 of $48.44. Verizon’s dividend yield is therefore also 4.8%. What are some of the pitfalls of using dividend yield as one of the main criteria for making investment decisions? You might not be seeing the whole picture! Here are five things you must be aware off: Strategic risk. Cash flow. Learn how to read a cash flow statement: https://www.youtube.com/watch?v=mZBjsIYrLvM&t=7s The turkey problem. Pay out versus invest. Lastly, math is just math. In summary, use dividend yield where appropriate, but look at the broader context before investing in the stock market! Thank you for watching! If you enjoyed this discussion of how to calculate and interpret dividend yield, then please press the “like” button for me, and share the video with friends and colleagues! Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
DuPont analysis ROE example Apple Inc (2017 results)
 
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How to perform a Return On Equity calculation, and ROE analysis? This example takes you through the 2017 results of Apple Inc, and shows you both the math as well as the interpretation of the numbers. Stick around for the full discussion, as things become very interesting when you start to attach meaning to the numbers! Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
CAGR explained
 
07:45
What does CAGR mean? How do I use CAGR in financial analysis? How to calculate CAGR? What is the formula for CAGR in Excel? All of these questions about CAGR will be answered in this video! CAGR is often found in the financial news, more specifically in merger and acquisition announcements, as well as investor presentations where a longer term perspective is taken than just the current year. You might find a CEO or CFO talking about the CAGR of the attractive markets the company competes in, the commitment the company makes on the CAGR of its revenue, and the resulting CAGR in earnings. What is important to understand is that CAGR is never stand-alone, it’s always the CAGR of something: CAGR of estimated market size, CAGR of revenue, CAGR of Earnings Per Share. Very often, CAGR is applied to a 3-year or 5-year period, to zoom out to the bigger picture of the historical financial performance of a company, or its expected future performance. What does the acronym CAGR stand for? CAGR is Compound Annual Growth Rate. If you look up the textbook definition of CAGR, it will tell you that CAGR is the geometric progression ratio that provides a constant rate of return over the time period. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Relationship between financial statements
 
02:21
How do the three financial statements fit together? What is the link between the balance sheet, the income statement, and the cash flow statement? That is the topic of this Finance Storyteller video! Let’s start with the opening balance sheet for the year, on January 1st. A balance sheet is a picture at a point in time of what we own and what we owe. Typical line items on the left, in the assets area, what we own, are: cash, receivables (sometimes also named accounts receivable or debtors), inventory, and fixed assets (or plant and equipment). Typical line items on the right, in the liabilities area, what we owe, are: payables (sometimes called accounts payable or creditors), accrued liabilities, debt and equity. The total monetary value of what we own on the left has to match the monetary value of what we owe on the right. The closing balance sheet for the year, on December 31st, has the same format, but will have different numbers. The balance sheet is a picture at a point in time, while both the income statement and the cash flow statement describe the flow of what happened during a period, in this case a full year, so the 365 days from January 1st to December 31st. The income statement shows you how much profit a company has made during a period. If you want to close the books at the end of the period to make the balance sheet balance, you have to add that profit to an account called “retained earnings”, which is part of equity. The cash flow statement shows you what were the sources and uses of cash during a period. When you close the books at the end of the period, the cash flow statement shows you in detail how you got from the opening cash balance to the ending cash balance. Cash was generated and used in three categories: cash from operating activities, cash from investing activities, and cash from financing activities. So you could see both the income statement and the cash flow statement as overviews that explain important movements between two balance sheets for the same company. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Gross Margin and Operating Margin explained
 
07:54
How to calculate Gross Margin and Operating Margin? Gross Margin and Operating Margin are two key financial terms to understand if you want to evaluate the financial performance of a company on the income statement or P&L (profit and loss statement). In this video, we will discuss the definition of Gross Margin and Operating Margin, and walk through the calculation of Gross Margin and Operating Margin for four well-known global companies in different industries. Revenue minus Cost of Goods Sold is Gross Margin. Gross Margin minus SG&A and R&D is Operating Margin or EBIT. Operating Margin minus interest and taxes is net income. We will go through the calculation of Gross Margin and Operating Margin for each of these four companies in this video: Accenture (NYSE: ACN), Adobe (NASDAQ: ADBE), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL). Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Return On Assets explained
 
02:54
How to calculate ROA? What does ROA mean? Return On Assets or ROA is a financial ratio that can help you analyze the performance of a company or business unit and compare the financial performance to others. This video takes you through the Return On Assets formula, shows you how to calculate ROA, how to interpret ROA, and gives suggestions on how to improve ROA. Return On Assets links together information from two of the three main financial statements, by taking the bottom line of net profit from the income statement and the left hand side of assets from the balance sheet. ROA or Return On Assets is defined as Net Income divided by Assets. In other words, the net profit that a company has generated during a year, divided by the book value of the assets that a company owns on the balance sheet date. ROA is an important indicator of business success. Can the company generate a good return on the assets it has invested in? If you want to improve the ROA performance of the company, you can either work on increasing the numerator of profitability, or reducing the amount in the denominator of assets. Profit can be increased by selling more units, charging a higher selling price, improving the product or service mix, realizing productivity and efficiency, achieving sourcing benefits, or reducing the interest or tax charges. Assets can be reduced by shorter credit terms to customers and improved receivables collections, increasing inventory turns, making selective lease versus buy decisions, improving the asset utilization of property, plant and equipment, or divesting lower margin business units or product lines. Here’s another way to look at the drivers of Return On Assets performance. ROA is influenced by two factors: ROS or margin performance, and asset turnover which you could call speed or velocity. Do you want your company to perform better on ROA? Dedicate resources to improving margins, as well as to improving speed. If you want to know more about the context of how ROA Return On Assets fits into financial ratio analysis, then please watch my video on DuPont analysis at https://www.youtube.com/watch?v=bhbDDSohJ84 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Return On Equity explained
 
03:45
What is Return On Equity? Return On Equity or ROE is a financial ratio that can help you analyze the performance of a company or business unit from the perspective of the shareholder, and compare the financial performance to others. This video takes you through the Return On Equity formula, shows you how to calculate ROE, how to interpret ROE, and gives suggestions on how to improve Return On Equity. Return On Equity links together information from two of the three main financial statements, by taking the bottom line of net profit from the income statement and the equity or shareholder capital amount out of the right hand side of the balance sheet. ROE or Return On Equity is defined as Net Income divided by Equity. In other words, the net profit that a company has generated during a year, divided by the book value of the shareholder capital that a company owes on the balance sheet date. ROE is an important indicator of attractiveness of a business to shareholders. Can the company generate a good return on the equity that investors have invested in it? Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Cash Flow Statement explained
 
09:21
Cash flow statement tutorial. How does a cash flow statement work? How do cash balance and cash flow relate to each other? What is cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities? You will find all of these explained in this Finance Storyteller video, including an example of the cash flow statement for Shell (AMS: RDSA). The cash flow statement is one of the three main financial statements. As the cash flow statement explains how much cash has come in and gone out during a year, and what the sources and uses of this cash flow were, you could see the cash flow statement as an explanation of how the cash balance (one of the most important assets) has developed between two balance sheets. Cash is king. It is critical at every stage of a company’s lifecycle. When you open your own business, you need cash to get started. You will need cash to grow and expand. If a company runs out of cash to pay its bills, it’s game over. What you see in a cash flow statement should be a direct reflection of a company’s strategy. Is the company spending enough to build its unique and sustainable competitive advantage? Are customers willing to pay for the products and services that the company supplies? Is the company able to reward its investors for the risk they have taken, by paying a dividend? These and other questions can be answered by analyzing a cash flow statement. It’s nice to have the total numbers of the cash balance as well as the total net cash flow, but it doesn’t tell us much yet about what goes on inside the company. To get a more meaningful look, we have to drill a level deeper into cash flow. That’s why a cash flow statement is split into three sections. The first section will have the word “Operating” in it, the second “Investing”, the third “Financing”. Many companies will call the first section “Cash From Operating Activities” or CFOA, or a variation on that wording like “Cash Flow From Operations”. Cash From Operating Activities is roughly the cash inflow from customers paying the company minus the cash outflow of the company paying for purchases from suppliers, minus the cash outflow of salaries paid to employees, and minus the cash outflow of taxes paid to governments. For most mature companies in good health, the cash flow from operating activities is a net cash inflow. The second section is often called “Cash From Investing Activities”, or a variation on that wording. This is where Capital Expenditures (a cash outflow), acquisitions (a cash outflow) and divestments (a cash inflow) are recorded. Cash From Investing Activities tends to be a net cash outflow for most companies in most years. The third section is often called “Cash From Financing Activities”, or a variation on that wording. This one can go either way: a net cash inflow or a net cash outflow. Does the company need money and attract new debt to finance itself? Then there will be a cash inflow. Does the company have a lot of cash on its balance sheet and no plans to put that cash to any productive use? Then the company might be paying a dividend to shareholders, which is a cash outflow. If you are interested in a more in-depth look at the similarities between two very capital-intensive industries (oil and telecom), please check the blog article on my website: http://www.devroe.org/?p=80 Understanding cash flow is a key element of “getting the picture” of a company. As an investor, analyst, employee or supplier, it is advisable to understand both the actual numbers of past years, as well as the intent going forward. Related video: Free Cash Flow explained simply and with examples https://www.youtube.com/watch?v=gl3OLtEX2PM Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
How to calculate EBITDA?
 
02:16
You can calculate EBITDA in two ways, if depreciation and amortization is split out as a separate line item in the income statement. But what if a company does not split out depreciation and amortization in their income statement? Like for example Walmart (NYSE: WMT). Can you still calculate EBITDA? Yes, as you can find the depreciation and amortization number on the cash flow statement, as many companies use the indirect method of cash flow reporting: you start with the net income, and then make adjustments to reconcile net income to CFOA. The main line item in that reconciliation is depreciation and amortization. Related videos: EBITDA example https://www.youtube.com/watch?v=7e_6qEo1grI EBIT and EBITDA explained simply https://www.youtube.com/watch?v=N6ZgIVAQeXQ&t=3s Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Accruals explained
 
09:00
Accruals, accrued expenses, and accrual accounting. The accrual principle is used extensively in the business world, but not intuitively clear to everyone. This short tutorial provides clear and simple examples of the accruals concept and accrual journal entries, so you can contribute to the discussion in your company next time the topic comes up! In many companies, the topic of accruals resurfaces at the end of every period, usually as a variation on this question asked by the CFO or corporate controller: “Quarter-end is near…. Do you have any accruals that need to be included?” Most finance people would know what the CFO means here, and the CFO probably assumes the rest of the business does as well, but that is often not the case. The question from the CFO could actually mean two things: are there any expense accruals to be made, or are there any revenue accruals to be made? You would make an expense accrual when expenses have been incurred for which we have not yet received an invoice from a supplier. You would make a revenue accrual when goods or services have been delivered, in other words the revenue has been earned, but we have not yet actually billed the customer. Using accruals allows a business to more closely adhere to the matching principle. If you have any accrual examples for your company, then please share them as a comment below this video. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Book Value vs Market Value of Shares
 
05:38
What is the difference between book value and market value of shares on the stock market? This video explains the book value and market value concepts, and illustrates book value versus market value using the example of Apple Inc. The distinction between book value and market value of a stock is basically one of looking back versus looking forward. Book value, or accounting value, is based on a company’s historical financial results, looking back. You use a company’s latest balance sheet to come up with the book value of the equity, you look up the number of shares outstanding (which is usually mentioned in the earnings per share calculation in the income statement), and when you divide the two numbers you get the book value per share. Market value, or economic value, depends on the expectations of investors for the future of the company, looking forward. Do investors see sunshine and blue skies coming up, or clouds and thunderstorms? In order to form an opinion about a company’s future, it is wise to dive into its strategy, technology, and leadership. Do these give you confidence that the company is on the right track? Next step is to try to translate that assessment to numbers: based on the strategy, technology, and leadership, what do you see as the possible revenue, income, and cash flow for the company for the next 10 to 20 years? Last step is to review probability and variability: do you think the projected revenue, income and cash flow are pretty much a “done deal”, so the risk and volatility are low, or is there a wide range of both positive and negative scenarios, so the risk and volatility are high? Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
SG&A Selling General and Administrative expenses (nonmanufacturing costs)
 
09:51
SG&A explanation, SG&A benchmarking, and SG&A improvement. SG&A = Selling, General and Administrative expenses. What are SG&A expenses? How to calculate SG&A? What is the “right” SG&A ratio? How much do world-class companies like Boeing (NYSE: BA), GE (NYSE: GE), LVMH (EPA: MC), and Tesla (NASDAQ: TSLA) spend on SG&A, and how have those companies been able to drive significant cost reductions? What is the difference between SG&A and COGS? What are the SG&A expense levels by industry? Find out in this Finance Storyteller video! Related videos: EBIT and EBITDA explained: https://www.youtube.com/watch?v=N6ZgIVAQeXQ GAAP versus non-GAAP: https://www.youtube.com/watch?v=ewzlgnGtfmg Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Non-GAAP versus GAAP metrics
 
10:33
What are non-GAAP metrics? What are definitions, examples and concerns regarding non-GAAP financial measures? Learn the difference between GAAP and non-GAAP in this video! This video has four sections: What is GAAP? What is non-GAAP? What are "common" non-GAAP metrics? What are the concerns about non-GAAP reporting? Which guidance have regulators (SEC, FASB, IASB) provided? We walk through the context of GAAP and non-GAAP metrics in this video, and discuss Verizon (NYSE: VZ) non-GAAP measurements and Valeant (NYSE: VRX) non-GAAP metrics. GAAP means Generally Accepted Accounting Principles. Using GAAP provides uniformity in how companies report their financial performance. Having accounting standards like US GAAP and IFRS enables you to compare the performance of companies within and across economic sectors, so the standards are necessarily generic in nature. GAAP numbers should be neutral, comparable and verifiable, and provide information that markets can trust. Non-GAAP metrics are alternative definitions of (in most cases) profitability, that are supposed to enrich the financial information that investors receive about a company’s performance. In other words, free-of-charge additional information to provide insights into the company. Many companies will include a footnote that states that “non-GAAP metrics are useful to investors in their assessment of our operating performance and the valuation of our company”. How does one spot a non-GAAP metric? Well, the words “adjusted” and “excluding” often give it away: adjusted Gross Profit, adjusted EBITDA, adjusted Net Earnings, adjusted Earnings Per Share, Operating Profit excluding special items, Net Income excluding non-recurring items, and on and on and on. By the way, some companies don’t call non-GAAP information “non-GAAP”, but speak of core profitability, normalized profitability, underlying profitability, or “pro forma” measures. Let’s remember the overarching principle of financial reporting: financial statements should be a “fair and accurate representation” of the company’s financial position, results of operations and cash flows. For both GAAP and non-GAAP information, another key principle is that information cannot be misleading. Please subscribe to the Finance Storyteller YouTube channel. More videos coming soon! More information on the SEC guidance on non-GAAP measures available at: https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
How to analyze an income statement - Walmart example (case study)
 
12:38
Introduction to the income statement. This income statement tutorial shows you how to get started with reviewing the income statement of a company, the same way I would do it with participants in one of my finance for non-financial manager courses. Here is Walmart’s (NYSE: WMT) income statement, or profit and loss statement (P&L) for the fiscal years ended January 31st, 2017, 2016 and 2015. 2017 is on the left, 2015 on the right. The income statement can be found in the annual report. There is a lot of information here, we need to set priorities on which items we are going to dive into, to get the most valuable use of our analysis time. My proposal would be to first dive into the revenue performance, which seems to have dropped from 2015 to 2016, and then has come back up in 2017. What are the main drivers for revenue? Next I would look into the margin performance. How have gross margin, operating margin, and net income developed in relation to the fluctuations in revenue? As retail is traditionally a fairly low margin industry, every penny counts. Net Income is almost 9 billion dollars lower than Operating Income, let’s review what is going on in the interest and tax lines. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Skin in the game (Nassim Taleb) book review
 
08:14
"Skin in the Game: Hidden Asymmetries in Daily Life" is a 2018 nonfiction book by Nassim Nicholas Taleb, former financial options trader, statistician, professor, and bestselling author of The Black Swan. Taleb's thesis is that skin in the game is necessary for fairness, commercial efficiency, and risk management, as well as being necessary to understand the world. The book is part of Taleb's multi-volume philosophical essay on uncertainty, titled the Incerto, which also includes Fooled by Randomness (2001), The Black Swan (2007–2010), The Bed of Procrustes (2010–2016), and Antifragile (2012). Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Cash flow direct method vs indirect method
 
04:47
What are the differences between preparing a cash flow statement using the direct method versus preparing a cash flow statement using the indirect method? The difference between the methods is purely in the section called CFOA, or Cash From Operating Activities. For the sections at the bottom, the direct method and the indirect method use the same line items. In Cash From Investing Activities, the main line items are capital expenditures, proceeds from selling factories or buildings, and business acquisitions or divestments. In Cash From Financing Activities, the main line items are dividends paid, shares issued or repurchased, and issuances or repayments of debt. Here’s the example from FAS95 on reporting CFOA using the direct method. You start off with cash received from customers of 13.9 billion (a positive number, cash inflow), you deduct cash paid to suppliers and employees 12 billion (a negative number, cash outflow), and then account for smaller items such as interest paid 220 million and income taxes paid 325 million. Total net cash provided by operating activities, calculated using the direct method is 1.4 billion, which should be the same if you calculate it by using the indirect method. For another example of using the direct method: https://www.youtube.com/watch?v=hDQzoIX9Ryk Here’s the example from FAS95 on reporting CFOA using the indirect method. When you use the indirect method, you start off with net income, or net profit. In this example, net income is 760 million. Next step in the indirect method is to look for any non-cash items from the P&L. In this example, the main non-cash item is depreciation and amortization, which is 445 million. You deducted depreciation as an expense in order to report the correct amount of EBIT and profit before tax in the income statement, and to calculate the correct amount of corporate income taxes. For cash flow purposes, you will have to add back that same amount of depreciation. The next four items work in a similar way: you make adjustments for items that are treated differently when you recognize profit or costs versus when you record cash receipts or cash disbursements of a company. A key section of the indirect method is in the middle of the page: increases or decreases of working capital items on the balance sheet. If accounts receivable goes up, then cash goes down, in this case 215 million. If inventory decreases, then cash goes up, in this case 205 million. Etcetera. Total net cash provided by operating activities, calculated using the indirect method is 1.4 billion. For another example of using the indirect method: https://www.youtube.com/watch?v=2tr_6D2SE3w So why would you use the direct method (which in some countries is rare)? First of all, FAS95 encourages (but doesn’t mandate) companies to report gross cash receipts and gross cash payments. Two of the FASB members arguing in favor of mandatory use of the direct method at the time FAS95 was being discussed and reviewed, said that it is more informative and more consistent with the primary purpose of a statement of cash flows. FAS95 mentions that the direct method may help investors to estimate future operating cash flows based on historical detail. Lastly, International Accounting Standard 7 (the FAS95 equivalent in IFRS) has similar wording: “encouraging companies to use the direct method”. I have a lot of material available on the Finance Storyteller YouTube channel that can help you get a good understanding of the topic of cash flow and related items. For example, I have full walk-throughs for you of both direct method and indirect method cash flow statements! Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Free Cash Flow explained
 
12:39
What is Free Cash Flow (FCF) and how do I calculate it? What is Free Cash Flow used for? What is the Free Cash Flow performance of Exxon Mobil (NYSE: XOM), Facebook (NASDAQ: FB), General Electric (NYSE: GE) and General Motors (NYSE: GM)? This Finance Storyteller video provides an in depth look at common and alternative definitions of Free Cash Flow (FCF), compares the profit view and the cash flow view of looking at a company’s performance, and analyzes the Free Cash Flow numbers published by Exxon Mobil, Facebook, General Electric and General Motors. Free Cash Flow is usually defined as: Cash flow not required for operations or reinvestment Cash flow available for distribution among all the securities holders (debt or equity) of an organization Calculation: Cash From Operating Activities (CFOA) minus Capital Expenditures Unfortunately, the Free Cash Flow definitions that companies use are not always the same. Some stay very close to what you see here, but we will also see some alternative definitions along the way in this video. Related videos: Cash Flow Statement explained https://www.youtube.com/watch?v=mZBjsIYrLvM GAAP versus non-GAAP https://www.youtube.com/watch?v=ewzlgnGtfmg&t=74s T-accounting https://www.youtube.com/watch?v=-DjEE6jLe4Y Depreciation https://www.youtube.com/watch?v=6SY8s1_OEro&t=24s Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
EBITA vs EBIT and EBITDA
 
04:54
What is the meaning of EBIT, EBITA and EBITDA? Which companies use EBIT? Which companies use EBITA? Which companies use EBITDA? How do you calculate EBIT, EBITA and EBITDA? Let’s find out! Let’s walk through step by step how to get from net income to EBITDA. If you add back corporate income tax expense to net income, you get to EBT: Earnings Before Taxes. If you add back interest expense to EBT, you get to EBIT: Earnings Before Interest and Taxes. If you add back amortization expense to EBIT, you get to EBITA: Earnings Before Interest, Taxes and Amortization. If you add back depreciation to EBITA, you get to EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
History of accounting
 
04:06
Welcome to a short overview of the history of accounting in Western Civilization, in a “big picture” kind of way. This video takes you through five major eras of development in the history of accounting, and highlights the major breakthroughs, many of which are relevant up to this present day! What’s the essence of the accounting profession? It hasn’t changed that much over time. Accountants are here to record your transactions. The core part of the word “accounting” is: “count”. We help you count, record, classify, summarize, reconcile and analyze. That role started a long time ago, and has evolved along with developments in society and technology. The video walks you through five major eras in the development of accounting: 1. Early accounting records have been found in Mesopotamia, Assyria, Phoenicia, Sumeria and Egypt. The main purpose was to record the growth of crops and herds. 2. The early Renaissance. The birth of the monetary economy, where merchants depended on bookkeeping to oversee multiple simultaneous transactions financed by bank loans. Luca Pacioli was the author of a book on mathematics, which was printed and published in Venice, in 1494, and included a 27-page section on bookkeeping. This is seen as the first known published work on the topic of accounting, and includes a description of double entry bookkeeping and ledger classes, concepts that are in use until this very day. 3. The Dutch East India Company became the first company in history to issue bonds and shares of stock to the general public. In other words, it was officially the first publicly traded company, because it was the first company to be ever actually listed on an official stock exchange. This new ownership structure drove further developments in accounting methods. 4. The industrial revolution started in the late 1700s in Britain. The steam engine is an important symbol for the technical developments around the time. As machines took the central role in manufacturing, and labor was largely seen as expandable, machines became the assets on the balance sheet and people a mere expense in the income statement. 5. The advent of the computer, shaking up and revolutionizing society to this very day. Large parts of transaction processing can now be fully automated, and new ways of building organizations emerge. Accounting frameworks like US GAAP and IFRS continue to evolve, adapting to the changing world around us. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Financial Acronyms Top 10
 
03:19
Business life is full of acronyms. Here’s the top 10 financial acronyms that you should learn, so you are able to join the conversation with the CEO at your company. #10. SG&A. Selling, General and Administrative expenses. SG&A video: https://www.youtube.com/watch?v=5S9xjBXx5v0 #9. GAAP. Generally Accepted Accounting Principles. GAAP versus nong-GAAP video: https://www.youtube.com/watch?v=ewzlgnGtfmg #8. EBITDA. Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA video: https://www.youtube.com/watch?v=N6ZgIVAQeXQ #7. DSO. Days Sales Outstanding. #6. CapEx. Capital Expenditures. CapEx versus OpEx video: https://www.youtube.com/watch?v=na4jbAh_vkQ #5. EPS. Earnings Per Share. EPS video: https://www.youtube.com/watch?v=TXjkQy5KJog #4. V%. Variance %. #3. EBIT. Earnings Before Interest and Taxes. Gross Margin and Operating Margin video: https://www.youtube.com/watch?v=VCMJzG1AaXA #2. ROA. Return On Assets. ROA video: https://www.youtube.com/watch?v=W5CrcMSBARU and https://www.youtube.com/watch?v=2j8bfR8KqJ0 #1. CFOA. Cash From Operating Activities. CFOA versus Net Income video: https://www.youtube.com/watch?v=SX6tDy7YPgc Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Cash Flow Statement example: Tesla 2016
 
08:33
The best way to learn how to read a cash flow statement is to go through real-life examples of companies you have heard of! Let me show you in this video what a cash flow statement is, and how the cash flow numbers look for Tesla (NASDAQ: TSLA) for 2016. Let’s start with the purpose of the cash flow statement. What a company shows by publishing a cash flow statement in an annual report, is how they got from the cash balance on January 1st (on the previous balance sheet), to the cash balance on December 31st (the latest balance sheet). The increase or decrease between the January 1st and December 31st cash balance is called cash flow. It consists of three categories: Cash From Operating Activities, Cash From Investing Activities, Cash From Financing Activities, or terms with slight variations on that wording. We will review Tesla’s cash flow statement for 2016. Tesla started the year with $1.2B in cash and cash equivalents, and ended the year with $3.4B. The total cash flow was therefore a net cash inflow of $2.2B. Now where did that $2.2B in cash flow come from? Cash From Operating Activities was an outflow of $100MM, or $0.1B. In finance, we put negative numbers between brackets. Cash From Investing Activities was an outflow of $1.4B. Cash From Financing Activities was an inflow of $3.7B. So that’s the top level cash flow picture: Tesla attracted financing in the form of debt or equity which allowed them to invest. Tesla ended the year with more cash than they started with, to continue investing and running everyday operations. In the video, we go one level deeper, discussing each of the cash flow categories. Cash From Operating Activities will take the vast majority of the attention, Cash From Investing Activities and Cash From Financing Activities are fairly straightforward for Tesla in 2016. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Deferred tax assets and liabilities explained
 
05:53
What are deferred tax liabilities, and what is the difference between deferred tax liabilities and deferred tax assets? Deferred means that something has been postponed, and liabilities means that we owe something. In this video we explore the underlying concepts of tax deferrals, walk through the journal entries for deferred taxes, and take a look at the balance sheets of three well-known companies to see what is driving their deferred tax assets and deferred tax liabilities positions. Here’s the main concept for tax deferrals: the profit that you recognize for “book” or financial accounting purposes, is not the same as the profit you recognize for “tax” purposes. One and the same company can have two profit numbers in the same year: the profit per US GAAP or IFRS that is reported to the stock market, and the profit per individual country tax rules that is reported to the tax authorities. When you prepare financial statements for “book” purposes, or review financial statements prepared on this basis, then remember that “book” profit is the primary perspective, and “tax reality” needs to get fit in. You match tax expense in the income statement to “book” profit before tax, and record deferred tax assets and liabilities on the balance sheet for temporary (timing) differences between “tax” and “book” accounting. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
How to read a balance sheet: Alphabet Inc case study
 
11:29
How to read and analyze a balance sheet of a company? This balance sheet tutorial is a companion video to “How to read an annual report”, “How to read an income statement” and “How to read a cash flow statement”, and covers the 2017 balance sheet of Alphabet Inc (the parent company of amongst others Google). The balance sheet is a fascinating financial statement, you can learn a lot from it about the state of health of a company. Learning to read a balance sheet takes practice, practice and practice, and some understanding of the key terminology. You have come to the right place for that! The balance sheet is an overview of what a company owns and what a company owes at a specific point in time, in this case study December 31st, 2017. When I analyze a balance sheet, there are several things I always check, for each company I look at: the balance sheet total, which should be the same left and right (what a company owns equals what a company owes); the current ratio, a good indicator of a company’s liquidity; and equity as a percentage of the balance sheet total, which gives an indication of how the company is financed, and what its level of robustness is. Then I look specifically at several items on the assets side, and several items on the liabilities and equity side. What those specific items are, I only decide after taking a first look at the balance sheet of the company under review. It depends on the context. Related videos on Alphabet Inc financial statements How to read an income statement: Alphabet Inc case study https://www.youtube.com/watch?v=ToE-oggQiqQ&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60&index=1 How to read a cash flow statement: Alphabet Inc case study https://www.youtube.com/watch?v=koOdj6wRJ9M&index=2&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60 Balance sheet comparison Alphabet Inc (Google) vs Facebook https://www.youtube.com/watch?v=ya7rRZJCLEc&index=4&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
NYSE vs NASDAQ - who has more "mega cap" listings?
 
04:16
The two biggest stock exchanges in the world, in terms of total market capitalization value of the shares listed, are the New York Stock Exchange (NYSE) and the NASDAQ. But which of these two stock exchanges has the highest number of “mega caps”? Take your guess and find out in this Finance Storyteller video. Historically, the NYSE has always had the largest total market capitalization of companies listed, while the NASDAQ allows a far larger number of companies to be listed, particularly those that may be too small to meet the requirements of the NYSE. The NASDAQ also has far lower listing fees than the NYSE. What are “mega cap” companies? Well, these are the Big Dogs! A “mega cap” is a company with a market capitalization exceeding $100 billion, some would even say exceeding $200 billion. Let’s take a look at a subset of the top 25 companies in the world in terms of market capitalization, in the middle of May 2017. 15 out of these 25 companies have their primary listing in the US, so on either the NYSE or NASDAQ. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Accumulated depreciation
 
02:23
What is accumulated depreciation? Accumulated Depreciation is the title of the contra asset account on the balance sheet which is used when depreciation expense is recorded each accounting period. Let’s review how accumulated depreciation works with an example. Let’s take a fixed asset which we purchased for $100,000 and use for 5 years. When we bought the fixed asset, we put it on the balance sheet for its full value. When we start using it, assuming we use linear depreciation and a residual value of 0, we book a cost of $20,000 per year as a debit in our income statement (or P&L), and the offset of that journal entry is a credit to a balance sheet account called accumulated depreciation. If you want to know the book value or carrying value of the fixed asset at the end of year 1, you net together the historical cost of the fixed asset on the balance sheet, and the accumulated depreciation on the balance sheet, which is $100,000 minus $20,000, so the net book value equals $80,000. This information is recorded in two separate accounts, as you want to preserve the information of what you originally spent to purchase the asset, and what you have depreciated on it history-to-date. In year 2, you repeat the same depreciation journal entry, and get to a book value of $60,000. And on and on for years 3, 4 and 5. The difference between depreciation expense and accumulated depreciation is that depreciation expense appears as an expense on the income statement, and accumulated depreciation is a contra asset reported on the balance sheet. The income statement is reset to zero at the start of every year, so you start with zero in depreciation expense every year, and build it up in twelve monthly increments. The accumulated depreciation amount on the balance sheet keeps growing over the years, all the way to the point that the fixed asset is fully depreciated, or the point where you sell the fixed asset at, above or below book value. Would you like to learn more about depreciation? Check out my 9 minute video overview: https://www.youtube.com/watch?v=6SY8s1_OEro&t=2s&index=7&list=PLKbmcnUUQMllPKuD60uUwrefKYXRbl8Jy Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Return On Assets example
 
07:35
How to calculate Return On Assets or ROA? I will take you through two examples of calculating ROA, and then show you what the next steps in your financial analysis can be. ROA or Return On Assets is defined as Net Income divided by Assets. You find the Net Income number on the income statement or P&L, and the assets number on the balance sheet. Let’s perform the ROA calculation for two well-known American companies from very different industries: telecom company Verizon (NYSE: VZ), and retail company Walmart (NYSE: WMT). Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Amortization explained
 
05:31
What is the meaning of the financial term amortization in financial statements? Let’s discuss the definition of amortization, review how large the annual amortization expense is for several large and well-known companies, and even take a look at the amortization journal entry. It is not unusual for large multinational companies to have amortization expenses of $1 billion or more per year, and most of the amortization expenses seem to have something to do with intangible assets. In order to grasp the concept of amortization, it is important to realize that amortization is the “sister” of depreciation. Depreciation is the accounting process of allocating the cost of tangible assets to current expense in a systematic and rational manner in those periods expected to benefit from the use of the asset. For example, tangible assets like buildings, machines, and trucks get depreciated. You buy a fixed asset for $100,000, expect to use it for 5 years, so you take $20,000 depreciation expense in each of those 5 years. Amortization is very similar to depreciation, just change “tangible assets” in the definition for “intangible assets”: amortization is the accounting process of allocating the cost of intangible assets to current expense in a systematic and rational manner in those periods expected to benefit from the use of the asset. So while tangible assets get depreciated, intangible assets like patents, licenses, software, and capitalized research and development get amortized. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Debits and credits explained
 
04:29
Debits and credits made easy! I guarantee that you will understand the accounting term debits and credits once and for all after watching this video! How do debits and credits work? Does a debit increase an account, and does a credit decrease an account? Or is it the other way around? That really depends on the type of account we are looking at. For balance sheet accounts, we essentially have three types of account. Assets accounts, where the natural state is for an asset account to have a debit balance. Liability accounts, where the natural state is for a liability account to have a credit balance. Equity accounts, where the natural state is for an equity account to have a credit balance. Assets increase with a debit. Liabilities and equity increase with a credit. For income statement accounts, we have two types of account. Expense accounts, where the natural state is for an expense account to have a debit balance. Revenue accounts, where the natural state is for a revenue account to have a credit balance. Expenses increase with a debit. Revenues increase with a credit. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Dividend explained | dividend stocks versus growth stocks
 
05:20
What is a dividend, and is it worth investing in dividend stocks? Let’s walk through the definition of dividend, and compare investing in dividend stocks to investing in growth stocks. A dividend is a payment made by a corporation to its shareholders, usually in cash, and usually as a distribution of profits. How does investing in dividend stocks work? Let’s look at investing in the stock market in general. Let’s say that Sara wants to make her first investment in the stock market, and become a shareholder of a company. She is hoping that the investment she makes today of the small bag of money will grow into a larger bag of money. The difference between the current small bag and the expected bigger bag in the future is called the return. There are two ways this could happen: by an increase in the share price (Sara might be able to sell the shares she bought for a higher price than she bought them for) or from dividends paid by the company. Depending on the country that Sara is in, there might be a capital gains tax on the share price increase, and/or a dividend tax on dividends received. Should Sara invest in dividend stocks or growth stocks? This is confusing to her. She doesn’t fully understand what the difference is between dividend stocks and growth stocks. She does some research online, and finds the profile of a typical dividend stock (company A): over the past five years, the share price has gone up and down a little, but mostly stayed in the same range. That does not look very exciting to her at first. However, the cash dividend that this company pays on an annualized basis is $2.36 per share. So if Sara had invested in this company five years ago, she would have made an annual dividend yield of around 4.8%. By contrast, a growth stock that she discovers (company B) has had a very significant increase in the share price, but this company is not paying a dividend. If Sara had invested in this company five years ago, the value of her shares would have gone up, but she would have had to sell some of the shares in order to convert that to cash. Sara does realize that historical returns (either for dividend stocks or for growth stocks) are no guarantees for the future performance, and that by investing in the stock market she does risk losing money if share prices drop. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
VAT Value Added Tax explained
 
07:34
What is VAT? How does VAT work? VAT, or Value Added Tax, is a system of indirect taxation. In this quick VAT tutorial, I will walk you through the concept and definition of how VAT works, run you through a VAT example with a Value Added Tax calculation, and discuss the different VAT categories in use. How does VAT work? What is reverse charge VAT? Find out in this Finance Storyteller video. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
EBITDA vs EBIT comparison
 
04:01
How big is the difference between EBITDA and EBIT for companies in different sectors? Let’s find out by comparing the 2017 EBITDA and EBIT numbers for the Dow Jones Industrial Average companies! Let’s quickly revisit the definition of EBITDA. EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization. The difference between EBITDA and EBIT is in the last two letters of the acronym: Depreciation and Amortization. EBITDA is higher than EBIT, as it excludes more expense line items. Let’s take the 30 companies in the Dow Jones Industrial Average as a benchmark, and review their EBITDA and EBIT as percentage of revenue for 2017. As you can see, the Dow Jones Industrial Average consists of companies in a wide range of industries: from pharmaceuticals to retail to software, and many other sectors. Most companies report by calendar year. In case their fiscal year is different from the calendar year, for example Apple has a fiscal year running from October to September, I have taken the numbers for the fiscal year that most closely matches the 2017 calendar year. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
How to read a cash flow statement: Alphabet Inc case study
 
11:01
How to read and analyze a cash flow statement of a company? This cash flow statement tutorial is a companion video to “How to read an annual report” and “How to read an income statement”, and covers the 2017 cash flow statement of Alphabet Inc. It is advisable to watch the income statement analysis video first, as we will build on this income statement analysis when reviewing the cash flow statement. Related videos on Alphabet Inc financial statements How to read an income statement: Alphabet Inc case study https://www.youtube.com/watch?v=ToE-oggQiqQ&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60&index=1 How to read a balance sheet: Alphabet Inc case study https://www.youtube.com/watch?v=XKSOswE-_6c&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60&index=3 Balance sheet comparison Alphabet Inc (Google) vs Facebook https://www.youtube.com/watch?v=ya7rRZJCLEc&index=4&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60 We perform a high-level cash flow statement analysis of Alphabet Inc, by focusing on five areas: cash balance change over three years, cash balance walk for 2017, and a review of CFOA, CFIA and CFFA. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Cash flow indirect method
 
04:50
How to calculate Cash From Operating Activities (or CFOA) using the indirect method. This video covers the indirect method of cash flow reporting, a companion video will cover the direct method. The indirect method is explained with a short and simple example of how to construct a cash flow statement. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Days Sales Outstanding DSO
 
07:39
Days Sales Outstanding or DSO is a key working capital metric. We will cover the definition of Days Sales Outstanding, go through an example of how to calculate the DSO ratio, discuss the importance of DSO, and show 5 ways to analyze and improve DSO. Days Sales Outstanding, which is sometimes called Average Collection Period, is the average number of days that customers take to pay invoices. From a cash flow perspective, we would like DSO to be as low as possible. It is important to understand that if DSO goes up, then cash flow goes down. The reverse is also true: if DSO goes down, then cash flow goes up. Why is DSO so important? Because payments from customers are a key driver in Cash From Operating Activities! The incoming cash from customers paying on time and in full is as important for a company as it is for human beings to have oxygen to breathe. If you get cash in from customers, you can pay the invoices sent by your suppliers, the salaries of your employees, the taxes you owe to the government, and the interest you owe to the bank. If you don’t get cash in from your customers, then you might temporarily stay in business by borrowing more money or selling assets to pay your bills. If there is a structural problem with getting paid by customers, a company is likely to end up going bankrupt. DSO is the key metric to measure the ability to collect. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
YouTube earnings for a small channel (2018) / 2900 subscribers
 
01:42
How much money can you make running a small YouTube channel in 2018? We have all heard the stories of big YouTubers making millions. What is the reality for small YouTubers? My channel is called The Finance Storyteller. It covers finance and business topics. I have about 2900 subscribers, and 1000 views per day. I would like you to take a guess, and then I will show you the real numbers!
How to read an income statement: Alphabet Inc case study
 
13:02
How to read and analyze an income statement of a company? This income statement tutorial is a sequel to “How to read an annual report”, and covers the 2017 income statement of Alphabet Inc, the parent company of Google and other bets. There are many interesting things to learn about Alphabet Inc and its business model. The income statement is a great starting point for that learning journey. Related videos on Alphabet Inc financial statements How to read a cash flow statement: Alphabet Inc case study https://www.youtube.com/watch?v=koOdj6wRJ9M&index=2&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60 How to read a balance sheet: Alphabet Inc case study https://www.youtube.com/watch?v=XKSOswE-_6c&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60&index=3 Balance sheet comparison Alphabet Inc (Google) vs Facebook https://www.youtube.com/watch?v=ya7rRZJCLEc&index=4&list=PLKbmcnUUQMln5eTjJstYPUNrfPH8b7l60 This video is for educational purposes only, none of the comments in this video should be interpreted as investment advice. I am not a shareholder of Alphabet Inc. As the video is for educational purposes, please do try this at home! I am very interested to hear your comments and suggestions, please post them below the video. I first take only the numbers of the latest year, to set priorities for the analysis. Going down the income statement from top to bottom, the first thing that jumps out is the revenue of more than $110 billion. Second item: margins, how do operating income and net income compare to revenue. Third item is an unusual one: European Commission fine of $2.7 billion. What is behind that, and what are the implications going forward? Fourth item, other income which in the case of Alphabet Inc is a positive contributor. Fifth item: the provision for corporate income taxes. This looks unusually high at more than half of the earnings before taxes. “To Do” list for the Alphabet Inc income statement analysis: revenue, margins, European Commission fine, other income, and taxes. Companion videos: How to read an annual report: https://www.youtube.com/watch?v=Kw-1nopchnA&list=PLKbmcnUUQMllEvFvqN-AIcXt8dj6LH-IQ&index=1 How to read a cash flow statement (Alphabet Inc 2017): https://www.youtube.com/watch?v=koOdj6wRJ9M&list=PLKbmcnUUQMllEvFvqN-AIcXt8dj6LH-IQ&index=3 How to read a balance sheet (Alphabet Inc 2017): https://www.youtube.com/watch?v=XKSOswE-_6c&list=PLKbmcnUUQMllEvFvqN-AIcXt8dj6LH-IQ&index=4 Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Finance vs Accounting
 
02:41
What is the difference between finance and accounting? Are finance and accounting different and separate fields, or are there overlaps? Let me provide my Finance Storyteller perspective on finance versus accounting, I look forward to engaging in further discussion with you in the comment section below! A very generalized view of the difference between finance and accounting is the following: finance is managing the company’s financial resources, accounting is recording and reporting the (financial) transactions of a company. Finance is viewed as forward looking, planning future transactions. Accounting is viewed as backward looking, recording past transactions. This distinction of finance versus accounting sounds good, but might be an oversimplification versus how things work in the real world. So let me propose (in this video) a more granular and gradual view of finance and accounting, as a continuum. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Goodwill explained
 
09:11
What is goodwill? How to calculate goodwill? We will discuss the definition of the finance and accounting term goodwill, and go through an example of goodwill by discussing one of the largest technology acquisitions in recent history: the acquisition of social network Linked In by Microsoft (NASDAQ: MSFT). We will review the calculation of goodwill for that headline-grabbing deal, which is a great example of how to record goodwill on the balance sheet. For some companies, goodwill is in the top 3 of largest categories of assets on their balance sheet. If you want to make sense of a company’s financial statements, then a basic understanding of the concept of goodwill is invaluable. Goodwill is the excess of the purchase price paid for an acquired firm, over the fair value of its separately identifiable net assets. A definition of goodwill in simpler terms: goodwill is the difference between what a company pays to buy an acquisition target, and what that acquired company is worth “on paper”. Goodwill is recognized only in a business combination, and goodwill is not amortized. Why would any acquiring company pay a premium for an acquisition target above what that company’s net assets are worth? Goodwill reflects the perceived superior earnings capacity of the business combination. Companies have to perform an annual impairment test to both goodwill and intangible assets. What that impairment test does is basically to assess whether the carrying value of goodwill and intangible assets is recoverable. In simple terms: if the financial results and future prospects of the business you acquired are dramatically dropping, you need to write off all or part of the goodwill and intangible assets. Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
Inventory turnover: definition and clear example
 
03:40
Inventory turnover is an indicator of speed or velocity in a company: how quickly does a company turn its inventory into sales. How many times is the inventory sold or used in a year? Inventory turns can be a very meaningful metric for a retail company or an industrial company. In my opinion, Inventory turns as the ratio between Sales and Inventory, is the most useful definition. As a finance director in a company, you can help create value for this company by providing visibility of the drivers of this key ratio of inventory turns. The management team can then ask the right questions to drive results: How do we sell more units? How do we increase the price per unit sold? How do we optimize our supply chain so we have fewer units in stock? How do we work on productivity to lower the cost per unit? Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
How to make a YouTube video using PowerPoint in 10 steps
 
05:01
Welcome to a short tutorial on how to use PowerPoint to make YouTube videos. This is a 10-step process, I find it fairly easy to use, and I hope you will be using it as well as to make your YouTube video!

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