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

Price to Earnings, all else equal and that's a big thing all else equal, the lower the Price to Earnings, you're paying less for something.

So a plus b have to be equal to 50.

So this is trailing 12 months.

And we can eyeball it right here.

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

So based on that, this looks cheaper.

The company's profitability improved.

Maybe Abby made 50 and Ben earned 0.

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

So now we add an interesting line.

It's just a faster way of saying

Profitable.

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

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

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

Invest financial assistance, but also management assistance.

And you're going to pay a lower Price to Earnings ratio if the company isn't growing.

How is it that you make money?

So you say, they both deserve a price to earnings of 10.

You could also have forward earnings.

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

And you might wonder, where does that come from?

And what's left over for the equity?

looks neutral.

This is 2009 estimates.

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

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

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

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

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

But today we re going to be talking about revenue streams.

Abby's and Ben's earnings given only this first constraint.

So notice.

Everything on this line would be a valid combination of

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

So in 2013 you'll be making 16.

As a matter of fact, you did a pretty large catering.

Well, if you think about it, in a new market on year 1 you have no customers, and so your revenue is essentially flat.

If I'm paying 10 today for 2 of earnings in 2009, the Price to Earnings of 5 for Company A.

If we look at the returns to labor, in other words total wages paid out in the economy, we see them at an all time low and heading very quickly in the opposite direction.

Lifespring Hospital is a joint venture between Acumen and the government of India to bring quality, affordable maternal health care to low income women, and it's been so successful that it's currently building a new hospital every 35 days.

Now, immediately if you were to see this is the real market, where you see two identical companies or you think they're identical companies and one is trading at a lower multiple or a lower Price to Earnings multiple than the other, you should be very suspicious.

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

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