Let's think a little bit about leverage.

Where am I taking this money out of?

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

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

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

That assets, A for assets, is equal to

But we'll do a whole playlist on that.

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

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

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.

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.

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

Countrywide.

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

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

It should start to make a little bit of intuitive sense

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.

I'll do that in yellow.

One, what shares are share of

liabilities plus equity.

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 use 100 gold pieces.

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

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

So this is just another visual representation that

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

Good health is his capital.

liabilities.

So now it's getting interesting.

Well, indeed, I'm very, very lucky.

We try and find your professional qualifications...

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

In return on equity, the numerator is the net income that we got, so it's 350,000.

Capitalist country.

And so you probably see the relationship here.

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

So let me do that in a vibrant color.

That's 11,000.

Let me do equity in a different color.

It's all his equity.

Well, I have 250,000 left over.

Let me play this again.

Well I would have 50,000 left over.

So business schools have been struggling with this gender grade gap.

Varsity that's the first time I realized that I was a natural leader.