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

So this is trailing 12 months.

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

Maybe Abby made 50 and Ben earned 0.

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

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

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

That was a bit of a diversion.

So a plus b have to be equal to 50.

So something very interesting is happening.

How much are you going to have to spend on channel promotion, shelf space, any other channel extra charges?

Profitable.

So let me write this down.

So these are the people, gee, subscription and half pay rental, let's do some math.

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

The company's profitability improved.

You're making 10 , and that's just to connect the dots.

And we can eyeball it right here.

And so you're almost ready.

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

This is Earnings Per Share, not total earnings.

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.

Today, we are going to talk about revenue models.

So now we add an interesting line.

So they both deserve at least a price to earnings of 10.

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

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

But this could happen.

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

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

So now we switched places.

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

So notice.

Invest financial assistance, but also management assistance.

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

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

We talked about the potential ways to charge

Then whatever this generates is actually non operating income.

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

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.

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

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.