The company's profitability improved.

So this is trailing 12 months.

So a plus b have to be equal to 50.

Profitable.

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

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.

There's kind of a general rule of thumb that if a company is not doing anything, it's just stable, safe, not moving up or down, that a fair or a cheap Price to Earnings is 10 times this year or last year.

Invest financial assistance, but also management assistance.

And we can eyeball it right here.

Maybe Abby made 50 and Ben earned 0.

So that's a little bit of a taste of why someone might realistically, in this case, pay a higher Price to Earnings for safety.

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

And what's left over for the equity?

Are the inertial stabilizers offline?

Now, what good are springy legs then? What can they do?

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

Sometimes we're profitable. Sometimes we're not.

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

So notice.

Everything on this line would be a valid combination of

Is it a license or subscription model?

You're free, kind of thing.

Rigid wheels give sufficient stability to a low speed vehicle steered by outside forces.

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.

What does that tell us?

It's just a faster way of saying

It looks like our profit is jumping all over the place.

So now we add an interesting line.

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

So why don't you think about this for a second and tell me, which part was the revenue stream and which part was the pricing tactic.

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.

clapping

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

Let's compare EBlT to operating profit.