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

Are you using the past 12 months earnings?

Maybe Abby made 50 and Ben earned 0.

So a plus b have to be equal to 50.

Profitable.

So something very interesting is happening.

But when you lower the Price to Earnings you are increasing the Earnings to Price.

And we can eyeball it right here.

And when people talk about earnings of a company, this is what they're talking about.

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

Obviously a 6 Price to Earnings of 20 times 2013 earnings isn't as good as a 6 Price to Earnings of 2010, because earnings in the future aren't worth as much as earnings today.

Everything on this line would be a valid combination of

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

So now we add an interesting line.

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

In this case, we use last year's earnings.

So a lot of people immediately will figure out the Price to

Anyway, going back to Price to Earnings, we calculated the

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

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

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

So notice.

Invest financial assistance, but also management assistance.

Today, we are going to talk about revenue models.

And so you're almost ready.

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

It's just 10 because one, this is a nice round number.

We're going to take a write down.

And how they were going to create demand was through search ads, social media, stadium promotions.

I say it's time to start making money from The Facebook, but Mark doesn't want advertising.

At any given price point, higher quantity demanded.

So the amount that this number grows by, the amount that our equity grows by, is earnings.

The difference with Ecosia though is that, in Ecosia's case, it draws the revenues in the same way, but it allocates 80 percent of those revenues to a rainforest protection project in the Amazon.

At the end of the month we count your clicks

This is Earnings Per Share, not total earnings.

How is it that you make money?

It's just a faster way of saying

So for every dollar of earnings per year, if you believe that the 2008 earnings are indicative, you're paying 4 here.

It's closer to a bank account that Company B, sure it made 5 in earnings, but that is risky.

Are you with me?

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

And what's left over for the equity?

So let me switch colors just to ease the monotony.

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

One of the viewers pointed out not incorrectly that one definition of return on asset so this whole video's going to be on return on asset that one definition of return on asset, and if you look it up on some of the finance sites or even some finance textbooks, they'll tell you it's net income over total assets.