[MUSIC] If we continue down the income statement, we find here operating expenses. These are operating expenses other than manufacturing costs. So here, this is going to include marketing expenses, all expenses that have to do with the stores, with design, with logistics and so on and so forth. We also have here financial expenses. And as you see in the case of Inditex, these are really low. And actually they are positive, because they also have financial investments. So this is a company that generates lot of cash, therefore doesn't need financial debt, doesn't have loans. And therefore, it doesn't have any cost of interest. This is why you observe these results here. And if we take a look at the bottom line, at the total profitability of the group, what we see is that the margin or let's say the return on sales, net income over sales, is very stable around 14%. So the 1% that we lost in gross margin, we have recovered it by cutting another cost down the income statement. And the second thing we can do is compare this net income with the total investment of the shareholders in the firm, so that's a return on equity. If we do that in 2014, you will see that this company exhibits an amazing return on equity of 27%. Not bad, right? Okay, let's wrap up our analysis of Inditext Group. After analyzing the balance sheets, the income statement, the cash flow statement, we see here a great business that is very profitable, first of all, with a return on equity of 27%. They keep the margins under control. They are very efficient in the logistics, and they can keep also a very low level of inventory. And the cool thing of this business is that they collect in cash from the customers immediately. And they pay to suppliers very late. So the more they grow, the more cash they collect. Now, for most of the companies out there, whenever they grow, they actually need more financing, why? Because they are small companies, customers pay very late and they have to pay immediately to the suppliers. So, they are squeezed in the middle, in the case of big retailers, it's the opposite. So they collect cash immediately and they pay very late to the suppliers. So, a company that is growing all over the world with many stores, with a great brand like Zara that is very profitable and that generates lot of cash, a great business. Before we finish, just as a little curiosity, when we were looking at the balance sheet here, maybe there is a question that cross your mind. We know that Inditex owns a very well-known and prestigious brand called, Zara. Actually most of the revenues are derived from this brand. But if you look at the balance sheet, we don't see any big intangibles other than the lease for rights. So where is the brand Zara on the balance sheet? You will remember from the definition of an asset, that an asset, from an accounting perspective, is something that we own, that we control, so in the case of the brand, that's a case of course we control Zara. Second, it has a future value, obviously Zara has a future value for Inditex. And third, it's a result of a past transaction. Well, Zara is a brand that has been created internally inside Inditex. It's a result of many different things. A lot of advertising, excel in operations, good service to the customer, so at the end of the day, it's not the result of a past transaction and this is why it is not considered an asset. So all these expenses in a service to the customer, logistics, advertising, they have to be recognized as expenses. So, Zara is not recognized as an asset on the balance sheet of Inditex. If we find any brand here in the budget of any taxes because this brand was purchased from another company, like for example, the brand Massimo Dutti. Anyway, let's leave it here, let's leave our analysis here. So, by now, you have realized that you're capable of reading and understanding real financial statements of a huge corporation like Inditex. [MUSIC]
