In this example that I did in the previous video, it was the pre tax return on asset.

Which it seems like a really good deal, because now the

The price per share, the market price per share, is 3.50, so you could also say it's trading at a discount to book.

So a plus b have to be equal to 50.

Profitable.

But just so you know what EBlT is, EBlT is just Earnings

If it's growing 100 a year for 20 years, this is actually a very good deal.

Invest financial assistance, but also management assistance.

And we can eyeball it right here.

Maybe Abby made 50 and Ben earned 0.

Because when someone says earnings, are those the earnings last year?

And what's left over for the equity?

The Price to Earnings ratio is equal to the price so 3.50 divided by the earnings per share.

The earnings I just said, this is actually what happened to the company.

So let's look at them over the course of one year.

So notice.

So this is just the same thing as net income plus interest plus taxes.

Everything on this line would be a valid combination of

But in general if you take EBlT and you take out the non operating income, you get back to operating profits.

Another way to kind of just talk about this is to get the present value of 110 a year from now, we discount the value by a discount rate.

And what type of a return can they get?

Abby earned 10 more than Ben.

And why don't you like them as much?

So the price would be 100.

Another type of revenue model is licensing.

The reason why you are willing to pay a higher Price to

So let me switch colors just to ease the monotony.

And they were male and female 18 30 and they were casual fans.

And the first one is that this whole idea about revenue stream, Steve, I get it.

The company announced a profit of 200 million after tax.

What does that tell us?

It's just a faster way of saying

So now we add an interesting line.

But for our sake, let's just say that when you give the widget, you have earned the money that they give you, and that's revenue sales.

The probability of reaching S prime given that we started state S and apply action A.

This is really important to pay attention to, because so many people say, oh, a company made this much.

And we add back the interest, at least in this example, we get to an operating profit number.

We are assuming a very simple world, were the is no taxes, we have no debt, we have no intrest or things

And so I'm left with net income of 350,000.

But I just want to give you the gist of what's happening.

They're going to make 0.35 in 2009 as well.

Discount rate

Now what can we do ?

And that's because they have the same exact asset.

Let's compare EBlT to operating profit.