And so this is our yield.

So the total assets were 5 billion in assets.

I'll do that in yellow.

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 bank is going to be able to fulfill its promise.

And we have these 4 billion of CDOs.

The assets are generating this.

And if this is worth 2.5 billion, then your total assets are what?

But I have an accounts receivable of 400, so my total assets now are 300 of assets, remember, accounts receivables aren't assets, because someone owes me something, someone owes me cash in the future.

So that one definition takes this and they divide by the total assets.

Interest is nothing but rent.

So I'm also solvent.

That's its asset it has.

Because remember, this piece right here only adds up to 140,000!

A 6 yield is guaranteed on the investment.

Because in the last video I talked a little bit about return on asset, where we just took the operating profit, and we divide that by the assets.

Why don't we control for other factors?

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

So this is just another visual representation that

Do Low Interest Rates Ensure High Asset Prices?

So this is the operating profit. This is the money that just comes out of the asset itself.

So its assets.

And they say, you know what?

I still have no liabilities

And then the equity is, essentially we would look at this formula.

Well, that means the ratio of the assets to the equity is 2 1.

That assets, A for assets, is equal to

And so we took this number as the numerator and we divided by the number of assets.

liabilities.

He is a man of considerable means.

Total number occurrences

So cash could be an asset.

Malibu Equity and Investments.

So they really had, let's see, they had an 80,000 loan, a 250,000 asset, so they really had 250,000 minus 80,000, that's 170,000.

And this goes back to the very first video we saw.

liabilities plus equity is equal to assets.

And what I wrote here is, it has 4 billion of liabilities.

Obviously , a machine you can't do all of those things to it, but you can at least touch it and possibly smell and taste it.

The business will yields a fair return on the investment.

You'd have to give up 93 of your net worth.

We could do a series of videos on that.

I don't want to draw this box.

And rich, eh?

And so you can see very simply that assets I'll write this down, you're getting a little bit of a introduction to accounting right here but assets are going to always be equal to liabilities plus equity.

My liabilities would be 145,000.