You're getting a little bit of an introduction to accounting right here, but assets are going toĪlways be equal to liabilities plus equity. Left on the mortgage, then I have $100,000 in equity. This is completely the same idea as when people talk about $20 million left, and this is called the equity, or the owner's equity. You'd have to pay the debt holders, you'd have to pay off the debt first, so you'd have 100 minus 80, you'd have $20 million So, if the company were sold and these assets reallyĪre able to be sold for $100 million, you get $100 million. This company were sold and the debt paid off. Now, what's left for the owners? A good way to think about that is what would happen if Other than debt, but for simplicity, let's say that's their only liability and debt tends to be the biggest. Let's say that's all of their liabilities. The idea of what I mean of part lender, but this is debt. I won't go into that too much, but I think you get They might have issued, maybe they issued a million bonds, where each of those essentially represent a debt of $80. This could have been a straight debt from a bank, or this could have been via a bond issue. Let's say they borrowed some money, and so they owe some people collectively $80 million. It by issuing bonds, which I will not go into detail on. Now, let's say that Company X has also borrowed some money, and maybe they borrowed $100 million, and I'm not going to go into exactly how this number is determined or who's determining it, or who's saying this is 100 million, but let's just say this is, we agree that this is how much their land and their patents and their copyrights and their cash and their buildings and everything else they have is worth. Let's say that they're worth $100 million. The very abstract sense, say this is Company X's assets. A loan to me is a liability, which we'll talk about in a second, but anyway, let's just in A loan to someone else is an asset because in the future, they will pay us back. It can be exchanged for things we need in the future. Cars are assets because they give, provide us some transportation. ![]() A house is an asset because it gives us the future benefit ofīeing able to live in it and protecting us fromĬold weather and rain. Things that are going to give us some type of future benefit. With Company X right here, and let's say if we lookedĪt Company X's assets, and when we talk about assets, it really is the same thing that we mean in the real world, or in our everyday life when we talk about assets. Little bit more tangible of exactly what we're owning, let me draw a simple balance sheet for some company X. ![]() Is going to be stock, but it's good to keep in mind that they're very different things. I'm not going to go into detail in that because the focus of this ![]() $1,000 to the company and since there's 1,000 of you, you're lending $1 million to the company. Let's say it's $1,000, and there's 1,000 people who do that. So, for example, if you buy a, well, I'll just say a face value bond of, let's say, it's $10. Some stocks or bonds," or "I deal with stocks and bonds." Bonds. Just to contrast this with bonds because they're often kind of used in the same phrasing, "Oh, I'm gonna go buy ![]() So the general sense, and this is exactly what it really is, is when you buy stock or you buy shares, you're essentially becoming a partial or a part owner of the company. I think we all have a general sense, but what I want to do in this video is make it a little bit more tangible to really understandĮxactly what you're buying when you buy a share of stock. Little bit about what it means to own shares or stock in a company, so shares or stock.
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