3. What is a Balance Sheet and Margin of Safety

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Preston Pysh is the #1 selling Amazon author of two books on Warren Buffett. The books can be found at the following location:
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In lesson three, we explored the importance of a Balance Sheet. We learned that current assets and liabilities are income streams and obligations, respectively, that a company will receive or pay during the next 12 months. We also learned that the equity of a business was equal to the total assets minus the total liabilities. After determining a company's equity, we can use that important number to determine the margin of safety that's associated with buying a business.

[@KingJamesVL]

Made in 2012. Still watching in 2018. 3rd time watching. Thanks for the content Preston!

[@aldeebsaad]

2020

[@alisherfez32]

2020 baby

[@ewanwheat5110]

2021

[@soot2006]

2024!

[@toe2toe]

This is some of the most valuable information that I have ever come across on the internet. I study economics in university and I feel like this video taught me more about the stock market in 14 minutes than I learn in an entire semester. If you don't already sell a product (which I'm sure you do) you should! I would buy it. Subscribed to your newsletter.

[@julianbho7179]

I enrolled in a Masters level subject for Accounting with the intent of gaining some basic understanding of reading financial documents. It was super intense, lots of hours and I still can't grasp the concept. I've just spent less than 15 mins watching your video and it all makes sense. Both your content and delivery is perfect! Thank you for sharing.

[@rohitthapliyal3945]

Julian B Ho Hey I want to ask you one thing if someone buys that business for $200,000 then in future will they get the $20,000 of the business all by themselves and what does that 10% mean?? And will Nancy also gonna get some of net income even if she sells the business??

[@kvitlim8443]

​@@rohitthapliyal3945 $20k is her net income, Nancy gets a 10% return yearly as the owner. If she sells the business and wants to work for the new owner AND the new owner wishes for her to stay as the sole employee, then it's possible to still get paid as an employee. But her pay is really up to her new boss at that point. So, the net income of the newly acquired company now belongs to the new boss.

[@mohitgarodia5063]

@@rohitthapliyal3945 10% is return on investment if market is willing to buy that business at $200,000. Suppose If market is willing to pay $100,000 and net income remains same then the return on investment will be 20%. No Nancy wouldn't get anything if she sells everything. But suppose if she sales 50% of business (share) to someone else and holds 50% of business (share) with her, then she'll receive 50% of the net income.

[@afrosamuri05]

Mate you are a legend. Thank you very much for sharing this knowledge in a way the average person can understand, I'm looking forward to delving into the stock market with a bit more confidence.

[@Kiwinnit]

I totally agree :D

[@snickle1980]

It's been 3 years since you posted an interest in the stock market. How have you fared so far? Curious.

[@rohitthapliyal3945]

Hey I want to ask you one thing if someone buys that business for $200,000 then in future will they get the $20,000 of the business all by themselves and what does that 10% mean?? And will Nancy also gonna get some of net income even if she sells the business??

[@egor.okhterov]

Rohit Thapliyal if Nancy sells the business, she is no longer an owner and she will not a a single dollar from net income. If you sell a business you become a stranger to it. Property is not yours, net income is not yours and debt is also not yours.

[@mihajlosmiljanic7683]

Can someone tell me what cite can I use for investing and where can I read those books that you can use to calculate net income, equity and whatever is cash flow?

[@ashalk3985]

I study Business at a university and never understood these concepts as well as I did by watching this video! Great job Preston! Keep up the good work and please share more content if you can. Cheers!

[@rohitthapliyal3945]

Ak Ash Hey I want to ask you one thing if someone buys that business for $200,000 then in future will they get the $20,000 of the business all by themselves and what does that 10% mean?? And will Nancy also gonna get some of net income even if she sells the business??

[@Mrswatkins2u2]

Loving these lessons!! You are a great online teacher, your presentation and format is very organized and paced in manageable doses of information for anyone wanting to learn the Buffet way. Thank you times ten.

[@ndeyecherko1944]

Thank you Preston for all you do. I graduated years ago with a degree in Finance and at that time I didn't take the time to really appreciate what I was learning. Your podcast and lessons are much simpler, easy to digest and listen to. thanks again.

[@kellyskeete9081]

This is hands down the best video series!

[@anviyaan]

Mr. Preston Pysh, Take a bow . I have never seen a video explaining this clearly, your examples of a small business to a large business and comparing the same with the actual terminology of the stock market is simply the best way to explain anyone who is interested in stocks. I am fortunate enough to watch this video and probably will share this knowledge to many with the same examples. Thanks a ton Preston

[@linos1987]

Paedagogical, good pace, good explanation, examples, practice principals. You are basically a teacher. A really good one. Thanks!!

[@TheRiddl37]

It's rare to find someone who's explaining in a really simple and clear manner! awesome job friend !

[@kitsontuli2713]

i wish they could teach everything as simply as this

[@ryantaylor170]

+joy ntuli When I become Rich I will explain it in a way that is easy to understand, i got you.

[@ticks2012]

+joy ntuli There's a saying that goes "if you can't explain it simply, you dont understand it sufficiently". This is a good series...

[@winnifred6768]

@@ryantaylor170 did you become rich

[@mmr4882]

I cannot agree enough

[@mps6934]

These lessons are so good! Love the summaries at the end and the structure overall!

[@giannisbrea1283]

Thank you Preston, I watched the first 3 videos and they are perfect. I will watch them all and then I will send you again.Thank you again.Nice job!!

[@RobWill5864]

Awesome course! I just started watching from lesson 1 and the way you explain everything makes it so easy to understand. Thanks!

[@davef5916]

You're a fantastic teacher, thank you for sharing this knowledge for free.

[@lesegokoapeng8524]

In my years of online research, I have never found such rich, easy to understand information on company valuation. I applaud you @Preston Pysh!

[@poovarasanp8857]

Thank you so much. I have been reading "The Warren Buffet Way" sometimes it was difficult for me to understand since am a non-finance person. But your teaching help me a lot since it's in laymen's term. Appreciate your efforts

[@benhansen6383]

You are such a great teacher! Thank you so much for what you do. Tremendously valuable. So easy to understand. Wow, it is so rare to find that level of pedagogy anywhere

[@NomanNoman-vu6cm]

This lessons are very easy to understand. Thank you for providing this for no cost.

[@Hgkbukk]

So glad I found this channel! Great stuff that's explained so simplified and easy! Thanks alot Preston!

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Wow! Your videos are explained so well!! I am really enjoying them! Thank you so much for taking the time to make them!

[@spid404]

One of the best in the field. Your work is helping me a lot. Thank you. GREAT VALUE!!!

[@WmTyndale]

All these videos are outstanding expositions of financial and investment principles. You can't go wrong. Great examples!

[@joeldawriter]

2019 joining the ride of learning more about stocks great content Preston. Timeless content i would say.

[@sher7602]

This is of great value! i come from a background in multimedia and design and i'm so ready to start investing. I have to prepare myself first and your videos are feeding my brain just the knowledge i need! thank you!!

[@Adam_Bednarek]

Wow! It's incredible! You made it unbelievably easy to understand. Thank you so much for your effort!

[@jacquelynlaw4843]

You are really good at making complicated things easy to understand. Thank you very much for sharing!

[@rhettbautista7775]

Clear, concise teaching. Very well presented. Thanks for your hard work.

[@HouseSweetHouse1]

Very nicely done, so easy to understand. I'm looking forward to see how nancy gets on in the coming days :)

[@nancylan13]

This is so much better than any course I have paid for. That's what I love about KZbin!

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The way you explain the concepts is really good!

[@michaelhofby]

Seriously dude you are the one that has explained these accounting things in the most fantastic way ever!!! :D

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Thank you very much!! You are doing a great job explaining something that might be complicated and making it so easy to understand! Well done!!

[@Shaniloka369]

I love it when he's explain so well to understand it makes want to learn.

[@captainksan]

A very lucid tutorial. Incredible work.

[@rajvardhanshinde6251]

Wow, You are an amazing teacher. I used to think the income statement is the most important, but after watching the video, I realized how the complete picture turns upside downs after having a look at the balance sheet. Curious to complete the whole series and know more about cash flows.

[@benjaminmccarthy2214]

nice video. i really love your teaching, respect sir!

[@chioma3100]

I've had the Intelligent Investor book for years and before borrowed it from the library. I started investing in my mid twenties without understanding Buffet's strategy at all. Saving money good. Blowing money bad. Even with that, I earned dividends participating in DRPs, participated in my workplace 401K, purchased bonds, changed my spending habits became a Thrift store and sales only shopper. I accrued a lofty sum in just a couple of years, but lost it all through poor choices. Trying to go back to those habits now 20 years later is tough but necessary. Thanks for helping me to finally understand the content. I feel like I will be successful using a scalpel instead of a shovel.

[@techpalle]

I am trying to read Intelligent investor. But it is hard to understand ( for the one who is not having baiscs of stocks). But your explanation is very clear and even a layman can undertstand this. I rarely applaud people :)

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I'm trying to read that book and i agree! It is hard to read. I even but the audio version of it! I keep playing it over and over again. Then i cross over to these videos to make sense of it all.

[@sincerelaughter1561]

Man I thought it was me. Yeah man this book is kinda hard, at least in the beginning where I’m at. Try Dhando Investor. It’s a bit easier. Also “the Richest man in Babylon” is a great book to get into as well.

[@crowdozer3592]

thank you so much for this... I kept getting suggestions to start with the intelligent investor, but so much went over my head. This is so helpful

[@thegreatsilence1081]

It still is good content in June 2021, Thanks for this Preston !

[@sksd26]

Your way of explaining things is awesome!!!

[@koskido]

Your lecture is very simple to understand and has taught me a lot . thanks

[@janvotrel4158]

Your lectures are great not only for those willing to invest in the stock market but also for those buying a company. Great job. Thank you!

[@sharonmatzkin979]

Thank you so much for the clear explanations! Keep up the GREAT work!

[@TylerLybarger]

Thank you so much. You made this so easy and simple to understand. Much appreciated!

[@Michael-jv2gf]

Does a great job at explaining in simple terms

[@JesusReigns7]

Ahm, your videos are so valuable! I would really love if there would be quizzes added to each lesson to make sure we really understand the content. Thank you!

[@chrishernandez6668]

These videos are great! The knowledge shared is incredibly insightful

[@muhammadakifnaseer7834]

You are the best. Such clarity. Thank you!

[@Skill0rLuck]

Thank you for these videos. Very simple and well explained. Perfect for those just getting into the market.

[@tomltomm2866]

Honestly who needs college when you have this guy posting free videos that I can learn at my own pace and It's on me to learn it because I want to not because I have to... Thank you so much for this it really is so informative and easy to digest to someone who started investing like last month!

[@amardeep4181]

Many thanks Preston..concepts very clearly crisply explained

[@luisramosdelacruz5625]

I am really thankful for your lessons, i am learning a lot :)

[@viktorlevin8301]

Preston Pysh, thank you so much for sharing this knowledge with us. Im 17 and im looking forward to be the next Warrren Buffet.

[@mason1438]

How's it going so far

[@sampopyk]

Amazing man. Thank you so much for providing such great information to help beginners understand.

[@SEN83000]

How simple you explain things...Thank you soo much...

[@abhkar]

Your videos are really great!!! Thanks for making them....

[@lisavinc1]

This is very helpful! Thanks so much!!!

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your presentation was very helpful and simple to understand

[@nagasreenu926]

May God bless you Preston, You are adding value to people's lives, AMEN.

[@ctptcare]

Thanks for sharing Preston. You're the best!

[@balkabag2064]

Very nice videos. Good for buying everything. House, business, instrument etc. etc. Thank you

[@anirban27]

Awesome! You have put in so much of effort and it has benefited us so much! Thanks Preston for this awesome training. :)

[@akash.deblanq]

Homie! cheers!

[@OTGThailandbyWETeam]

Thank you very much for teaching this. Very easy to understand everyone who want to start investing must watch this VDO.

[@hemanthkumar9908]

Thanks a lot for all this videos..I have learning a lot from it

[@deddywirata3719]

This is truly well explained. Thank you!

[@tinnguyen2219]

Thank you so much for such useful data. Greatly appreciated!!!!

[@AbelDamajAnathemA]

I don't know how to thank you for this channel !!

[@elboga1981]

Best investment course on the net!

[@davidjperrot]

Very good way to explaining. Well done. Thank you very much

[@bikashchaurasia5310]

amazing way of explanation.......great going....!!!!

[@nishan2643]

This is a great video lesson! Thank you.

[@mukherjeeaveek]

+Preston Pysh You are my saviour. Your videos are amazing. I work for GE in UX and in my present project I am dealing with complex financial reports that I do not understand shit. Your videos are helping me understand the logic behind finance and I am getting confidence to go and do my work.

[@swara8481]

Amazing brilliant!!! Love from India… I am starting my high school this year and these concepts would help me approach my studies better. I am a musician but also want to focus on stocks and finance to achieve a great financial stability Dear 3 videos so far and would soon explore all your videos

[@UmbertoGonzalez1]

Sadly enough, I can’t calculate my equity because I’m only 12.

[@gkassociqate]

Thank you for the video really great stuff for people who want to learn ...god bless you..

[@ToStand2]

your work is very valuable man thank you a lot

[@cnce145]

very informative i've couldn't understand it before but now i do. Good work. u've just got a suscriber. nice

[@ishannarula3443]

Thanks for the lesson sir appreciated

[@kratlex]

this videos are AMAAAAAZINGGGGGG!! thank you so much

[@ministry_of_love]

Truly excellent lessons. Thank you

[@MrSmvann828]

this is gold! very easy to understand.

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Wow. You are amazing! I’ve subscribed.

[@rushikeshk25]

Great videos bro, I have seen very few ppl explaining like U did

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Great lesson, easy to follow ...GO!!!

[@JDMProductions]

Thank you for the lesson.

[@davidharford3873]

This was an excellent video!

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thanks for the video, it helped me a lot :)

[@TheHardeepSinghChannel]

thank you for the lesson, Preston Pysh

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Thank you for the amazing videos!

[@MiguelCardenas-xu2dw]

Very helpful and valuable, thank you!

[@vsvlkc]

Great techings. Very crisp and clear.

[@michaelhofby]

Very nice explanation man.. Thanks a ton!

[@BigheroC]

Just found this GEM. Thank you sir...#Godswork!!!

[@nikunjgattani999]

Thanks for sharing knowledge. What is the good margin of safety percentage ?

[@DaveVoyles]

Fantastic explanation

[@galalump9405]

what a great videos! thank you so much

[@spliffz0rplayingcallofduty637]

brilliant , thank you very much!