And what's left over for the equity?

Company A made 1 per share. 1 of EPS.

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

Maybe Abby made 50 and Ben earned 0.

And the other reason is, this was just 2008 earnings.

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

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

So a plus b have to be equal to 50.

Profitable.

So what they do is they just take your earnings number and you divide by the number of shares.

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

Invest financial assistance, but also management assistance.

And we can eyeball it right here.

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

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

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

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This is an equation that's called backup.

What does that tell us?

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.

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

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

And let's say that it's 2008 earnings.

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

So notice.

Everything on this line would be a valid combination of

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

And what type of a return can they get?

But in this case, you literally just take the price of the stock and you divide it by the earnings per share.

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

Where they start to diverge is below that line.

So this is trailing 12 months.

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.

That's day 0.