Let's think a little bit about leverage.

If it had 10,000 shares, and actually both of the shoe companies had 10,000 shares, then the market is essentially valuing the equity of Ben's shoe company at 215,000, even though the book value of the equity was 135,000.

It's really old, and it's tired.

Where am I taking this money out of?

So the difference between these two, my assets minus my

So he owns it outright so all of the 100,000 of asset value is actually his equity.

And let's call this entity AlG.

So how much wealth is gone from each person's perspective?

That assets, A for assets, is equal to

But we'll do a whole playlist on that.

Well, they lost, by entering into this transaction, essentially, they lost whatever equity they originally had in their house.

liabilities really are only 105,000.

Japan's inflation adjusted GNP growth rate was 5 .

But what if this equity is worth zero?

It's what the market is willing to give for it.

And what is required is a combination of physical capital, institutional capital, human capital and security, of course, is critical, but so is information.

From 500, let's say it goes to 1000, then that 1000 is now essentially split among these 5 shares now.

It should start to make a little bit of intuitive sense

And then on the equity side, because we have no liability, so in this case assets will be equal to equity.

I have factory tools worth 500,000, and then that cash will go away.

Countrywide.

liabilities plus equity.

So 26 minus 23 is equal to 3.

Effective interest rate

What happens in a closed end fund is that all of the investors are essentially

In a world without leverage so if I didn't have all this

So this is just another visual representation that

less capital intensive that there's less money that's required

It doesn't sound like we borrowed money or anything.

But our total assets, or the market's perception of the total assets of the company, are essentially what it's willing to pay for the equity plus the liabilities, so the market is saying that Ben's assets, the assets in that company are worth 220,000.

Japan achieved a real GNP growth of 5 last year.

Now, in 1970s, Bautz and Morgan introduced a different classification.

What is all this nonsense about hens?

But let's say its assets are worth 1 million.

Insolvency is when you actually, because of bad investments, you actually end up with less assets then do have liabilities and then there's nothing left over in the equity column.

Capitalist country.

And so you probably see the relationship here.

So here, there's no comparison.

leverage up against those inflated notions, you have to have a misallocation of wealth and, essentially, a lot of resources end up getting destroyed.

I'll do that in yellow.

Let's figure it out. It's equity.

One, what shares are share of

You love your heroes.

Right?

liabilities plus equity is equal to assets.