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  • Welcome.

  • Well there's been a lot of news lately about what's going

  • on with Bear Stearns and Carlisle Capital.

  • And I go to these parties, and I start explaining to people

  • because it's very exciting.

  • It's actually very important, to all of our collective

  • futures and the whole health of the financial system, and I

  • feel like people's eyes start to glaze over.

  • So with that in mind, I decided to take a little bit

  • of a hiatus from the core math and physics videos, and

  • actually do some accounting and finance videos.

  • Because I think what's happening in the world right

  • now is extremely important.

  • And I'm not just going to go straight into what's going

  • into Carlisle and Thornburg and all of these characters.

  • Because I think the newspapers do that, but a lot of people

  • don't understand the basic accounting.

  • What is a write-down, what does it mean when you don't

  • have liquidity, in really tangible ways.

  • So I'm going to use the same Khan Academy techniques to

  • hopefully explain some of this.

  • So I'm going to start with just a very basic accounting

  • concept of the balance sheet.

  • You might have a sense of what it is.

  • So let's say a scenario.

  • Let's say I want to buy a house.

  • So this is, let me draw a house.

  • So let's say this is the house I want to buy.

  • And the owner of this house is asking for $1

  • million for this house.

  • And I like the house, and I think that's a fair price.

  • Other houses in the neighborhood also went for $1

  • million, whatever.

  • Maybe they went for more, so I think it's

  • actually a good deal.

  • But all I have in my pocket is, let's say I have $250,000.

  • So what I'm going to do is, I'm going to create my balance

  • sheet before I do anything.

  • Before I go to try to get the house.

  • What is my before-house balance sheet?

  • What are my assets?

  • I'm going to write down Assets.

  • Well before we know what my assets are, let me tell you

  • what an asset is.

  • An asset is something that's going to give you some future

  • economic benefit.

  • So for example, cash is an asset.

  • Why is cash an asset?

  • Because in the future you can use that cash to get stuff

  • from people, or make them do things, or buy stuff.

  • You can, in a month from now, you can use your cash.

  • And you can make someone dance for you.

  • Or you can buy a car, or you can go on vacation.

  • So there's all sorts of things you can do.

  • I don't know if someone dancing for you is an actual

  • economic benefit, but you get the idea.

  • So cash could be an asset.

  • A house could be an asset, because the economic benefit

  • you get in the future is, you get to live in it, and not

  • freeze when it's freezing outside.

  • So that's what an asset is.

  • So what are my assets, before I buy the house, or get a

  • loan, or all of the things that are about to happen?

  • Well I have cash, I have $250,000 worth of cash.

  • What are my liabilities?

  • I'm going to write the liabilities on

  • the left-hand side.

  • I think that's the convention, but I forget.

  • It doesn't matter.

  • What are my liabilities?

  • Well, a liability is something that's an economic obligation

  • to someone else.

  • So if I take a loan from someone, I owe them interest,

  • or I have to pay them back the actual value of

  • the loan one day.

  • Say I have an IOU where I promise to dance for someone

  • in the future.

  • That could be a liability.

  • It'd be hard to value, but that's something that I have

  • to do in the future.

  • But what are my liabilities here?

  • Well in the example I gave, I'm just Sal, I have no debt,

  • I paid off my college loans, everything.

  • And I have $250,000 in cash.

  • So what are my liabilities before I buy the house?

  • Well, nothing.

  • I don't have any liabilities.

  • I don't owe anybody anything.

  • And that's, actually, that to me is the

  • definition of freedom.

  • So I have zero liability.

  • So what is my equity?

  • And you've probably heard this word, people borrowing their

  • equity, and all of these things.

  • So I'm going to give you a little equation, actually,

  • just to take a little bit of a tangent.

  • That assets, A for assets, is equal to

  • liabilities plus equity.

  • So in this case, our assets are $250,000.

  • My liabilities are what?

  • I owe nothing to nobody.

  • I don't know if that was correct, but anyway.

  • I owe nothing to anyone.

  • So my liabilities are zero.

  • So my equity must be $250,000.

  • So in this case, if I made a balance sheet before I enter

  • into any transactions -- let me make it look a little bit

  • like a balance sheet.

  • My assets are $250,000.

  • I have no liabilities.

  • And then my equity would be $250,000.

  • And if I were to draw this graphically-- actually, I

  • should probably draw it like this.

  • I have no liabilities.

  • So let me draw another little mini balance sheet here.

  • That's a neat square.

  • You probably can't see that square.

  • So I put my assets on the right-hand side.

  • And I'll say, there, I have $250,000 of cash.

  • And on the left-hand side, I have no liabilities.

  • And I'll just say I have equity, I have $250,000.

  • Now, equity might not make a lot of sense to you right now,

  • because I'm just saying, well, my equity is equal to my cash.

  • in general, equity is just what you own.

  • After all of your assets and liabilities are kind of

  • resolved, or they're cleared up, what do

  • you have left over?

  • That's equity.

  • So in this situation, after I pay off all of my debts, what

  • do I have left over?

  • Well I have no debts, so I have $250,000 in cash, total.

  • This will start to make sense when I go to the bank now to

  • get a loan to buy this house.

  • So this house is a $1 million house, right?

  • So how much of a loan do I need?

  • Well, I have $250,000 cash, so I'll go to the bank for a loan

  • for the remainder, for $750,000.

  • So let me draw the bank.

  • This is the bank.

  • The big dollar sign is made out of granite, to show you

  • that it can never fail.

  • It's going to be there forever, even if they do silly

  • things, like-- well I won't go into all the silly things that

  • they do, but they do many silly things.

  • We'll go into that later.

  • But the bank is going to give me another $750,000 in cash.

  • And in return, I'm giving them essentially an IOU.

  • And I'm going to pay interest. So they're going to hold this

  • little security that says, Sal owes me $750,000.

  • And he has to give me 10% interest every year.

  • So $75,000 a year, or something like that.

  • And in return I get $750,000 in cash.

  • So what does my balance sheet look like now?

  • Well, let me draw it.

  • Let me make sure my balance sheet now looks, let me draw

  • it like a square, because I think the visual

  • representation is helpful, and then I will split it.

  • So what are all my assets now?

  • I had $250,000 and I got another

  • $750,000 from the bank.

  • So now, what are my assets?

  • Well, $250,000 plus $750,000.

  • I now have cash of $1 million.

  • What are my liabilities?

  • Well, my liability, that's something that I owe to

  • someone else.

  • I owe the bank $750,000.

  • So liabilities, I'll just say L, L for liabilities, because

  • I'm running out of space.

  • My wife was complaining that I make these things very hard to

  • read, but what can I do.

  • Anyway.

  • So my liabilities-- I owe the bank $750,000.

  • So that's a liability.

  • And then the equity is, essentially-- we would look at

  • this formula.

  • Assets equal liabilities plus equity.

  • This is $1 million, this is $750,000.

  • What do I have left over?

  • Well, I have $250,000 left over.

  • That's my equity.

  • And I think hopefully the concept of equity is starting

  • to make a little more sense.

  • Now we have-- I could say that I have $1 million, and some

  • people are like that.

  • They think they're millionaires when they have $1

  • million in assets.

  • But they don't consider, well they might have $1 million of

  • assets, but they might owe other people $900,000.

  • So I wouldn't consider that person a millionaire.

  • They're more of a hundred thousand-aire.

  • Your assets might be $1 million, but you're not nearly

  • a millionaire, because you still owe

  • other people $750,000.

  • What you have left over, that really is your net worth, or

  • what you can have claim to.

  • And that's your equity.

  • Sometimes it's called owners' equity.

  • Or if there was a bunch of people pitching together, it

  • would be called shareholders' equity.

  • And maybe I'll do a little bit more on that in the future.

  • But hopefully now you can see that the balance sheet is

  • starting to seem a little bit useful.

  • I have the cash, and I took the loan from the bank, but

  • now I still haven't bought the house yet.

  • So what am I going to do?

  • Well I'm going to give my cash to the old owner of the house.

  • Or maybe this Toll Brothers, they just built this

  • McMansion for me.

  • So I give them $1 million, and in return they give me the

  • deed to the house.

  • I could just say they give me the house.

  • The house is always there, but you know it's really just a

  • contract and all the legal structure that I get around

  • it, and all the property rights and all of that.

  • But that's getting too philosophical.

  • So now what does my balance sheet look like?

  • Instead of cash-- I think I'm running out of space and time

  • to draw another balance sheet-- I don't have cash

  • worth $1 million.

  • I now have a house worth $1 million.

  • Assuming that it really is worth it, and that was the

  • correct price, I didn't overpay, whatever.

  • I now have, my assets are a $1 million house.

  • And I owe the bank $750,000.

  • So what's left over for me is $250,000 of equity.

  • I'm about to run out of time.

  • So I'm going to leave you from this video.

  • In the next video, I'm going to start explaining what

  • happens if the value of the house goes up or down, or you

  • need cash, and all of these interesting things.

  • And we'll start to learn a little bit more about what's

  • going on in the world.

  • See you soon.

Welcome.

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A2 初級

資產負債表介紹 (Introduction to Balance Sheets)

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    kellylin007 發佈於 2021 年 01 月 14 日
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