WEBVTT 1 00:00:00.900 --> 00:00:03.600 Observing the commercial development in 2 00:00:03.600 --> 00:00:07.400 October gave us your opportunity to understand why generally 3 00:00:06.400 --> 00:00:09.400 speaking the net change in 4 00:00:09.400 --> 00:00:12.300 cash position does not coincide with the 5 00:00:12.300 --> 00:00:12.900 profit. 6 00:00:13.800 --> 00:00:16.300 In addition I've been able to introduce the first 7 00:00:16.300 --> 00:00:20.100 two pillars of the working capital requirement. Now moving 8 00:00:19.100 --> 00:00:22.600 forward the commercial development 9 00:00:22.600 --> 00:00:25.800 in November will give me the opportunity to introduce us 10 00:00:25.800 --> 00:00:28.100 third one namely inventories. 11 00:00:29.300 --> 00:00:32.800 Moving forward requires sales forecast you 12 00:00:32.800 --> 00:00:35.700 remember in October act fall volumes 13 00:00:35.700 --> 00:00:38.300 200 for b2c 200 for 14 00:00:38.300 --> 00:00:40.200 B2B is a Psalm is 400. 15 00:00:40.800 --> 00:00:44.300 Now in November I anticipate 400 for 16 00:00:43.300 --> 00:00:46.700 b2c and 600 for 17 00:00:46.700 --> 00:00:49.200 B2B why because in my opinion 18 00:00:49.200 --> 00:00:52.500 stores are anticipating what's going to happen at 19 00:00:52.500 --> 00:00:55.700 the end of the year people are going to buy plenty of 20 00:00:55.700 --> 00:00:56.400 my products. 21 00:00:57.500 --> 00:01:00.400 I also anticipate that for December there will 22 00:01:00.400 --> 00:01:03.600 be an increase in b2c for the same reason and I 23 00:01:03.600 --> 00:01:07.700 think that sales are going to move forward up 800 24 00:01:06.700 --> 00:01:10.700 for B2B 1500 when 25 00:01:09.700 --> 00:01:12.200 I show this forecast to my 26 00:01:12.200 --> 00:01:15.500 supplier. The person tells me well, I will have a problem with 27 00:01:15.500 --> 00:01:18.200 manufacturing capacity because many people 28 00:01:18.200 --> 00:01:21.200 are going to ask me puzzles and anything of 29 00:01:21.200 --> 00:01:25.100 that kind in December if you want to smooth production 30 00:01:24.100 --> 00:01:27.100 output. You probably have to 31 00:01:27.100 --> 00:01:30.700 anticipate some purchases in November and I 32 00:01:30.700 --> 00:01:34.400 decide to buy 1,500 puzzles, 33 00:01:33.400 --> 00:01:36.600 which is more than the 34 00:01:36.600 --> 00:01:39.300 sales. I anticipate basically I'm going 35 00:01:39.300 --> 00:01:42.500 to create physical inventories and 36 00:01:42.500 --> 00:01:44.200 I have to introduce that in my books. 37 00:01:45.500 --> 00:01:48.400 The question is why do companies need 38 00:01:48.400 --> 00:01:51.400 inventories? The first reason is that 39 00:01:51.400 --> 00:01:55.100 the level of demand is volatile is risky you 40 00:01:54.100 --> 00:01:57.300 anticipate 1,000. It might be 41 00:01:57.300 --> 00:02:00.400 more it might be less if it's more there might 42 00:02:00.400 --> 00:02:03.300 be a private capacity because you are going to ask production to 43 00:02:03.300 --> 00:02:04.100 produce more. 44 00:02:04.900 --> 00:02:08.100 And if production is not flexible enough 45 00:02:07.100 --> 00:02:10.700 as not the possibility to adapt 46 00:02:10.700 --> 00:02:13.600 the capacity to the actual level of demand, then 47 00:02:13.600 --> 00:02:16.500 you are going to miss some sales. So you understand that 48 00:02:16.500 --> 00:02:19.400 the level of inventory you have to decide for your business 49 00:02:19.400 --> 00:02:23.300 operations is a function of the variability 50 00:02:22.300 --> 00:02:25.400 the risk in the level of 51 00:02:25.400 --> 00:02:28.700 demand combine ways the flexibility 52 00:02:28.700 --> 00:02:30.800 of your manufacturing process. 53 00:02:31.700 --> 00:02:34.900 If you are indefinitely flexible, no problem. 54 00:02:34.900 --> 00:02:37.400 If there is a risk in the demand if it's not 55 00:02:37.400 --> 00:02:40.700 the case, you have to combine again risk 56 00:02:40.700 --> 00:02:44.000 and flexibility to identify which inventory 57 00:02:43.300 --> 00:02:45.600 level will fit with your strategy. 58 00:02:47.300 --> 00:02:50.600 Now as I am growing I have to reinforce the 59 00:02:50.600 --> 00:02:54.100 support which is provided by business operations. You 60 00:02:53.100 --> 00:02:57.400 remember in September and October I do everything in 61 00:02:56.400 --> 00:03:00.000 November. I have to spend 62 00:02:59.600 --> 00:03:02.300 most of my time now in the 63 00:03:02.300 --> 00:03:05.200 administration of the company. So I move from half time 64 00:03:05.200 --> 00:03:08.600 to full-time in addition to that. I have to hire a 65 00:03:08.600 --> 00:03:12.200 salesperson which is going to cost me 1000 300. 66 00:03:11.200 --> 00:03:14.400 This is in the parameters. I'm going 67 00:03:14.400 --> 00:03:17.800 to initiate a little bit of management accounting as 68 00:03:17.800 --> 00:03:19.300 you are going to see in the P now. 69 00:03:20.100 --> 00:03:23.600 The profit is up because the actual 70 00:03:23.600 --> 00:03:26.800 says are the same as what I anticipated for 71 00:03:26.800 --> 00:03:29.400 November. This is quite good news. I 72 00:03:29.400 --> 00:03:32.300 sell more I make a profit anytime. I sell the 73 00:03:32.300 --> 00:03:33.100 profit is up. 74 00:03:33.700 --> 00:03:37.000 The Profit the gross margin is $10 75 00:03:37.600 --> 00:03:41.300 per puzzle multiplied by 400 b2c five 76 00:03:40.300 --> 00:03:44.000 dollars multiplied by 600 B2B 77 00:03:43.200 --> 00:03:46.600 and it's 7000. Now you understand my 78 00:03:46.600 --> 00:03:49.100 costs in direct cost which was 79 00:03:49.100 --> 00:03:52.200 supposedly fixing or not fixed because I have to 80 00:03:52.200 --> 00:03:55.200 adapt the capacity of my support to the level of 81 00:03:55.200 --> 00:03:55.800 sales. 82 00:03:56.500 --> 00:03:59.500 So the administrative expense is multiplied by 83 00:03:59.500 --> 00:04:02.300 two it's not my salary. It is your 84 00:04:02.300 --> 00:04:06.000 amount of money, which is allocated to Administration from 1,000 85 00:04:05.200 --> 00:04:08.300 to 2000 and I have to introduce 86 00:04:08.300 --> 00:04:11.600 a new course, which is selling expense from 87 00:04:11.600 --> 00:04:13.700 zero to 1,300. 88 00:04:14.300 --> 00:04:17.300 At the end of the day incremental fixed costs is 89 00:04:17.300 --> 00:04:20.300 more than phones by is incremental growth margins, 90 00:04:20.300 --> 00:04:23.500 and I generate a result in November, which 91 00:04:23.500 --> 00:04:25.400 is 3,000 700. 92 00:04:26.200 --> 00:04:29.500 Now that's over for the p&l. Let's move to the net change 93 00:04:29.500 --> 00:04:30.300 in cash position. 94 00:04:31.500 --> 00:04:35.400 You remember we start with accounts receivable? My customers 95 00:04:34.400 --> 00:04:38.200 be to be owed me 5,000 96 00:04:37.200 --> 00:04:40.500 at the end of October, which is a beginning of November 97 00:04:40.500 --> 00:04:44.600 now, I generate sales of 27,000. 98 00:04:45.300 --> 00:04:48.800 How much am I going to collect in November? 99 00:04:48.800 --> 00:04:52.300 Well, basically the five thousand and 100 00:04:51.300 --> 00:04:55.200 of October plus all my b2c 101 00:04:54.200 --> 00:04:57.400 sales you remember four hundred 102 00:04:57.400 --> 00:05:00.500 multiplied by 30 which is 12,000 plus 103 00:05:00.500 --> 00:05:03.500 5,000 is 17,000. What 104 00:05:03.500 --> 00:05:06.800 is due at the end is a six hundred puzzles, 105 00:05:06.800 --> 00:05:09.700 which I saw to B2B multiplied by 106 00:05:09.700 --> 00:05:13.100 25. It is 15,000. I collect 107 00:05:12.100 --> 00:05:15.300 the residual 5000 of 108 00:05:15.300 --> 00:05:19.000 end November and b2c sales accounts payable 109 00:05:18.300 --> 00:05:22.200 is the same story but it's about purchases you remember 110 00:05:22.200 --> 00:05:25.800 what is due to my supplier is 4,000 at 111 00:05:25.800 --> 00:05:28.700 the end of folk October I purchase for 112 00:05:28.700 --> 00:05:32.200 1,500 puzzles. The 113 00:05:31.200 --> 00:05:34.400 amount of money is 30,000. I'm going 114 00:05:34.400 --> 00:05:37.600 to pay only 50% of that. So what 115 00:05:37.600 --> 00:05:40.600 is you at the end is 15,000 which 116 00:05:40.600 --> 00:05:44.300 basically means that iPad the other 15,000 all 117 00:05:43.300 --> 00:05:45.200 the purchases. 118 00:05:45.200 --> 00:05:48.100 The mountains plus what was due at the beginning of the month 119 00:05:48.100 --> 00:05:52.600 4,000 I cash out 19,000 now 120 00:05:52.600 --> 00:05:55.300 I can build this document which is a changing 121 00:05:55.300 --> 00:05:58.100 cash position cash from sales. You remember it 122 00:05:58.100 --> 00:06:02.000 comes from accounts receivable 17,000 cash Outlets 123 00:06:01.500 --> 00:06:05.500 suppliers. It comes from the accounts payable 19,000. 124 00:06:04.500 --> 00:06:07.300 But in addition to that I have to 125 00:06:07.300 --> 00:06:10.600 pay the salaries to myself and to the salesperson 126 00:06:10.600 --> 00:06:13.900 the total cash outlays exceed 127 00:06:13.900 --> 00:06:18.400 the cash inflow is a cash collection by 5,300 128 00:06:16.400 --> 00:06:19.400 and there 129 00:06:19.400 --> 00:06:22.700 would be a deterioration in my cash position. It was 130 00:06:22.700 --> 00:06:26.300 12,000 beginning of the month. It is 6,700 at 131 00:06:25.300 --> 00:06:26.800 the end of the month. 132 00:06:27.600 --> 00:06:29.000 for a copper reasons 133 00:06:29.500 --> 00:06:32.500 first because I had to purchase more than what 134 00:06:32.500 --> 00:06:35.600 I sold. This is about inventor is and also 135 00:06:35.600 --> 00:06:38.900 because B2B is growing but I 136 00:06:38.900 --> 00:06:41.300 collect Monet later and it's less 137 00:06:41.300 --> 00:06:44.500 profitable than B to C. Now. We need to build a 138 00:06:44.500 --> 00:06:47.700 last document which is a balancy capital and 139 00:06:47.700 --> 00:06:50.500 change 10,000 retained earnings. 140 00:06:50.500 --> 00:06:53.500 November is and of October plus 141 00:06:53.500 --> 00:06:56.700 the profit in November 3,000 plus 142 00:06:56.700 --> 00:06:59.600 3,700 which comes from the November 143 00:06:59.600 --> 00:07:02.700 p&l. It's a total of accumulated range 144 00:07:02.700 --> 00:07:05.200 vested profit. 6,000 700 145 00:07:05.800 --> 00:07:08.500 The cash figures provided by the document 146 00:07:08.500 --> 00:07:12.700 which has changed in cash position. It's 6,700 147 00:07:11.700 --> 00:07:14.200 the same as retained earnings, but it's 148 00:07:14.200 --> 00:07:15.200 pure coincidence. 149 00:07:15.800 --> 00:07:19.800 Accounts receivable provided by calculations 15,000 150 00:07:18.800 --> 00:07:21.800 accounts people provided by 151 00:07:21.800 --> 00:07:24.500 calculations 15,000 as 152 00:07:24.500 --> 00:07:27.300 well. Now the last thing I have to account for 153 00:07:27.300 --> 00:07:30.200 is those purchases which are 154 00:07:30.200 --> 00:07:33.300 not yet sore. This is accounting for 155 00:07:33.300 --> 00:07:34.500 inventory. 156 00:07:35.500 --> 00:07:38.500 You remember that at the beginning of the period I didn't have any 157 00:07:38.500 --> 00:07:41.300 puzzle in my inventory. Then I decided 158 00:07:41.300 --> 00:07:45.000 to buy 1500 of them and sell only 1,000. 159 00:07:44.600 --> 00:07:47.700 What does it mean 500 puzzles are 160 00:07:47.700 --> 00:07:51.000 left at the end of the period. This 161 00:07:50.500 --> 00:07:53.300 is name an inventory and we have 162 00:07:53.300 --> 00:07:57.200 to permanently check that we have 500 puzzles 163 00:07:56.200 --> 00:07:59.300 actually in the warehouse, which is 164 00:07:59.300 --> 00:08:02.800 named the permanent inventory. And this is why external and 165 00:08:02.800 --> 00:08:05.200 internal Auditors on a regular 166 00:08:05.200 --> 00:08:08.400 basis are counting how many physical puzzles are 167 00:08:08.400 --> 00:08:11.900 actually in the warehouse really more 168 00:08:11.900 --> 00:08:14.000 unfortunately sometimes less. 169 00:08:15.200 --> 00:08:18.300 Now these 500 products that belong to the 170 00:08:18.300 --> 00:08:21.200 firm the same as cash which belongs to 171 00:08:21.200 --> 00:08:24.200 the firm or accounts receivable. It also belongs to 172 00:08:24.200 --> 00:08:27.500 the firm and it is very much related with the business 173 00:08:27.500 --> 00:08:30.800 activity of the company. This is why the inverter 174 00:08:30.800 --> 00:08:33.300 is accounted on the assets side of the 175 00:08:33.300 --> 00:08:36.300 balance sheet, you have everything which is owned by 176 00:08:36.300 --> 00:08:40.400 The Firm for its commercial and Manufacturing activity. 177 00:08:41.200 --> 00:08:44.400 How do we evaluate the inventory and purchasing 178 00:08:44.400 --> 00:08:47.300 price history called purchasing price, which is 179 00:08:47.300 --> 00:08:50.200 basically the cost which we are going to introduce in a 180 00:08:50.200 --> 00:08:50.500 p&l. 181 00:08:51.300 --> 00:08:54.300 I select twenty dollars per unit 182 00:08:54.300 --> 00:08:57.900 throughout the entire module obviously in 183 00:08:57.900 --> 00:09:01.200 real life. There will be different purchase prices. 184 00:09:00.200 --> 00:09:03.900 And then there are some different methods 185 00:09:03.900 --> 00:09:06.600 to evaluate the infatteries in the balance 186 00:09:06.600 --> 00:09:09.800 shape. It's not the objective of this module. Let's 187 00:09:09.800 --> 00:09:12.700 make it simple. Now. The inverter 188 00:09:12.700 --> 00:09:15.900 is at the end of November or 500 products 189 00:09:15.900 --> 00:09:18.500 twenty dollars per product one multiplied 190 00:09:18.500 --> 00:09:20.400 by the other it gives you 10,000. 191 00:09:21.400 --> 00:09:24.600 You remember we used columns for accounts receivable 192 00:09:24.600 --> 00:09:27.900 and accounts payable we use columns for inventory account. 193 00:09:27.900 --> 00:09:30.200 But we need two of them one is 194 00:09:30.200 --> 00:09:33.700 physical. The other one is accounting the books 195 00:09:33.700 --> 00:09:36.800 in units. I had no inventory 196 00:09:36.800 --> 00:09:40.300 at the beginning. I purchased 1,500. 197 00:09:39.300 --> 00:09:43.200 I consumed sold 198 00:09:42.200 --> 00:09:45.200 1,000 how much at the 199 00:09:45.200 --> 00:09:48.400 end 500 you multiply each and every figure by 200 00:09:48.400 --> 00:09:51.100 20 because it's the same price and you 201 00:09:51.100 --> 00:09:54.400 get zero 30,000 which is exactly the 202 00:09:54.400 --> 00:09:57.400 purchases and you have the purchase price as a 203 00:09:57.400 --> 00:10:00.300 good Soul which is 20,000. This is going to be the 204 00:10:00.300 --> 00:10:03.300 cost of sales and then you understand that there is 205 00:10:03.300 --> 00:10:06.600 a different between purchases and purchase 206 00:10:06.600 --> 00:10:09.600 price of goods sold. The first one is 207 00:10:09.600 --> 00:10:12.400 preparing your operations. So on one 208 00:10:12.400 --> 00:10:15.600 is the cost you have to put in a p&l later on 209 00:10:15.600 --> 00:10:18.400 in module 3 of this course, I 210 00:10:18.400 --> 00:10:20.400 will tell you that the production cost. 211 00:10:20.900 --> 00:10:23.900 Is not the same as the manufacturing cost 212 00:10:23.900 --> 00:10:26.400 of all these Goods which you saw 213 00:10:26.400 --> 00:10:27.600 this is the first example here. 214 00:10:28.400 --> 00:10:31.800 Not intuitively. When you look at these 215 00:10:31.800 --> 00:10:34.300 invitory account, you understand that you already 216 00:10:34.300 --> 00:10:37.100 use this accounting for inventories, but there was 217 00:10:37.100 --> 00:10:40.700 no inventory at the end. So everything which was purchased 218 00:10:40.700 --> 00:10:43.500 was sold this wall making life 219 00:10:43.500 --> 00:10:46.200 easier balance it now, we 220 00:10:46.200 --> 00:10:49.200 have all the items on the asset side. We have a 221 00:10:49.200 --> 00:10:52.500 new item which is in factories 10,000 accounts receivable 222 00:10:52.500 --> 00:10:56.000 and cash are provided you remember 31,700. 223 00:10:56.700 --> 00:10:59.500 Capital ten thousand retained earnings 224 00:10:59.500 --> 00:11:03.400 accounts payable total equity and liabilities 31 225 00:11:02.400 --> 00:11:05.600 700 again the 226 00:11:05.600 --> 00:11:08.200 balance it is nicely balancing. 227 00:11:09.300 --> 00:11:12.300 I suggest you make a small exercise which consists in getting to 228 00:11:12.300 --> 00:11:15.800 the spreadsheet and opening the tab November year 1. 229 00:11:16.600 --> 00:11:19.400 You remember we are supposed to sell 400 units 230 00:11:19.400 --> 00:11:22.600 on b2c and 600 to B2B. Let's 231 00:11:22.600 --> 00:11:25.600 imagine that it is the other way around and we sell 600 232 00:11:25.600 --> 00:11:28.200 units b2c. 400 units 233 00:11:28.200 --> 00:11:31.700 B2B what is impact on profit and 234 00:11:31.700 --> 00:11:32.100 cash? 235 00:11:33.100 --> 00:11:37.000 The good news about profit is that it's going to be higher by 236 00:11:36.400 --> 00:11:39.700 1,000 why because these 237 00:11:39.700 --> 00:11:42.800 200 units which we are generating five dollars 238 00:11:42.800 --> 00:11:45.400 are now generating ten dollars per 239 00:11:45.400 --> 00:11:48.600 unit remember it is 30 dollars versus 25 240 00:11:48.600 --> 00:11:51.900 dollars. So for 200 units, I generated incremental 241 00:11:51.900 --> 00:11:54.700 unit margin of five dollars one 242 00:11:54.700 --> 00:11:57.700 multiplied by the other gives me an incremental profit of 243 00:11:57.700 --> 00:12:00.400 1,000, but the very 244 00:12:00.400 --> 00:12:03.100 significant change is in the cash position. 245 00:12:04.300 --> 00:12:07.400 Because all these units are the 200 which I 246 00:12:07.400 --> 00:12:10.800 move from B to B to b2c. There are 247 00:12:10.800 --> 00:12:13.500 first going to generate a higher profit, but they 248 00:12:13.500 --> 00:12:16.700 are paid immediately as opposed to in one month's 249 00:12:16.700 --> 00:12:16.800 time. 250 00:12:17.400 --> 00:12:20.600 So you understand that there is a double positive impact on 251 00:12:20.600 --> 00:12:24.100 the cash position, which is due to the favorable effect 252 00:12:23.100 --> 00:12:27.600 of the mix Channel B2B versus 253 00:12:27.600 --> 00:12:31.800 b2c and instead of consuming 5,300 of 254 00:12:31.800 --> 00:12:34.200 cash. I generate an increase in the 255 00:12:34.200 --> 00:12:37.600 cash position by 700 the difference is exactly 256 00:12:37.600 --> 00:12:40.100 6,000 which is due to 257 00:12:40.100 --> 00:12:44.000 profit and which is due to cash collection. What 258 00:12:43.300 --> 00:12:46.400 does my balance it look like at 259 00:12:46.400 --> 00:12:49.200 the end in factories still the same 260 00:12:49.200 --> 00:12:51.100 accounts payable still the same. 261 00:12:51.900 --> 00:12:54.800 The couch receivable figure is much lower. 262 00:12:54.800 --> 00:12:58.600 Why because I transfer revenues 263 00:12:57.600 --> 00:13:00.800 B2B to revenues b2c. 264 00:13:00.800 --> 00:13:03.200 B2bits pad leader b2c's pet 265 00:13:03.200 --> 00:13:06.600 immediately. So the accounts receivable is down by 266 00:13:06.600 --> 00:13:09.500 these 200 units multiplied by 267 00:13:09.500 --> 00:13:12.300 25,000 you remember 268 00:13:12.300 --> 00:13:15.600 that cash is a by 6,000 and it's perfectly 269 00:13:15.600 --> 00:13:18.700 balance with the incremental profit on the equity 270 00:13:18.700 --> 00:13:21.500 side because retain earnings are incremented 271 00:13:21.500 --> 00:13:24.800 by the incremental profit of 1,000. Obviously 272 00:13:24.800 --> 00:13:26.600 the balancing balances. 273 00:13:27.200 --> 00:13:30.700 Some knowledge developed unintroduced in this November 274 00:13:30.700 --> 00:13:31.300 session. 275 00:13:32.200 --> 00:13:36.100 Companies very often need inventory 276 00:13:35.100 --> 00:13:38.900 as in veteran is purchased by 277 00:13:38.900 --> 00:13:41.800 the company. It's owed by the companies and 278 00:13:41.800 --> 00:13:44.400 it shows on the asset side of the balance sheet. You remember 279 00:13:44.400 --> 00:13:47.400 that the asset side shows everything the company 280 00:13:47.400 --> 00:13:50.400 owns Halls as it needs it 281 00:13:50.400 --> 00:13:52.400 for its business operations. 282 00:13:53.400 --> 00:13:56.700 Assets are accounted at cost at 283 00:13:56.700 --> 00:13:59.100 historical purchasing prices. 284 00:14:00.300 --> 00:14:03.400 Now when you hold an invitory of products because you 285 00:14:03.400 --> 00:14:06.400 want to prepare the company for growth. You understand 286 00:14:06.400 --> 00:14:09.900 that you're going to consume cash and that's 287 00:14:09.900 --> 00:14:13.900 a very strong statement, which I will repeat module 288 00:14:12.900 --> 00:14:16.600 after module growth consumes 289 00:14:15.600 --> 00:14:17.200 cash. 290 00:14:17.800 --> 00:14:20.100 Now, let's move a little bit further in terms 291 00:14:20.100 --> 00:14:23.600 of accounting what happens when a company 292 00:14:23.600 --> 00:14:26.700 sells a product imagine that I sell a 293 00:14:26.700 --> 00:14:29.600 product at $25 in a B2B 294 00:14:29.600 --> 00:14:32.900 Channel. This product was purchase for $20. 295 00:14:33.900 --> 00:14:36.500 The product is physically leaving the 296 00:14:36.500 --> 00:14:39.500 warehouse. So the product is also on 297 00:14:39.500 --> 00:14:42.300 an accounting point of view leaving the balancy. The 298 00:14:42.300 --> 00:14:45.300 invitory is down by Twenty Dollars. This 299 00:14:45.300 --> 00:14:46.500 is a cost. 300 00:14:47.100 --> 00:14:50.600 Now accounts receivable is a by 25 because the 301 00:14:50.600 --> 00:14:53.900 customer is going to pay in one month's time. But 25 302 00:14:53.900 --> 00:14:56.100 is a setting price. So you understand that 303 00:14:56.100 --> 00:14:59.600 the asset side of the balance sheet will be up by five 304 00:14:59.600 --> 00:15:02.100 dollars, which is a difference between a selling price 305 00:15:02.100 --> 00:15:05.800 and a cost and this difference is across. Margin. 306 00:15:05.800 --> 00:15:08.500 It's okay in selling price minus the 307 00:15:08.500 --> 00:15:11.200 cost as it is a profit. It will show in the 308 00:15:11.200 --> 00:15:14.900 balance sheet where we account for profit when we record for 309 00:15:14.900 --> 00:15:17.900 profit, which is retained earnings equity and 310 00:15:17.900 --> 00:15:20.400 liabilities are by five dollars 311 00:15:20.400 --> 00:15:23.600 and then you understand that there is absolutely no change 312 00:15:23.600 --> 00:15:26.900 in the cash position, but just the transaction 313 00:15:26.900 --> 00:15:30.200 which consists in delivering the customer is 314 00:15:29.200 --> 00:15:33.000 replacing an inventory biocans receivable 315 00:15:32.600 --> 00:15:35.300 and is incrementing the profit of the your 316 00:15:35.300 --> 00:15:37.900 body is a gross margin, which is a difference between these two 317 00:15:38.300 --> 00:15:41.400 Now November is over. We can prepare ourselves for 318 00:15:41.400 --> 00:15:44.500 December the last month of the year and our 319 00:15:44.500 --> 00:15:45.600 first closing.