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.

In proportion as the sales increase, the profit will rise.

So let's say the revenue or the sales in this case in a given period, let's say that this is an income statement for 2008.

Fair enough.

So a plus b have to be equal to 50.

Profitable.

Maybe Abby made 50 and Ben earned 0.

And we can eyeball it right here.

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

And so you're almost ready.

Everything on this line would be a valid combination of

Where they start to diverge is below that line.

So my operating profit is really my profit because I don't have to pay taxes on it.

And most of the time, there's no backup for the reported revenues at all.

Let's compare EBlT to operating profit.

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

So notice.

Invest financial assistance, but also management assistance.

What does that tell us?

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

It's the same plot.

When? I said it's time to monetise the site.

Minus 50,000.

The reason why you are willing to pay a higher Price to

And what's left over for the equity?

So let me switch colors just to ease the monotony.

And they were male and female 18 30 and they were casual fans.

And it has been a powerful marketplace differentiator, increasing sales and profits.

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

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

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

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

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

It is a better business model.

But what happened here?

At any given price point, higher quantity demanded.

So now we add an interesting line.

We learned that in our first video.

So in 2013 you'll be making 16.

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

Abby earned 10 more than Ben.

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

And why don't you like them as much?

So the price would be 100.

Another type of revenue model is licensing.