1 00:00:00,000 --> 00:00:11,140 Alan Cring Productions in association with the Emergent Light Studio presents the Illinois 2 00:00:11,140 --> 00:00:17,680 State Collegiate Compendium, academic lectures in Business and Economics. 3 00:00:17,680 --> 00:00:29,240 This is Business Finance, FIL 240 for spring semester 2024. 4 00:00:29,240 --> 00:00:32,360 Today, time value of money. 5 00:00:32,360 --> 00:00:41,240 We'll finish up the ratio analysis and then move on if we have time to time value of money. 6 00:00:41,240 --> 00:00:45,720 We're going to look at the numbers and then I made arrangements for a guest speaker to 7 00:00:45,720 --> 00:00:52,380 come in and have just a quick talk with you about markets, bull and bear markets, to give 8 00:00:52,380 --> 00:01:04,360 you some real world background in the subject of market performance and all that. 9 00:01:04,360 --> 00:01:06,880 Before we do that, let's look at the numbers. 10 00:01:06,880 --> 00:01:10,480 Madam, wow there's a dead screen. 11 00:01:10,480 --> 00:01:14,640 I was just testing you. 12 00:01:14,640 --> 00:01:15,640 Try that again. 13 00:01:15,640 --> 00:01:17,680 There, there's your screen. 14 00:01:17,680 --> 00:01:22,560 Okay, madam, bull day or bear day? 15 00:01:22,560 --> 00:01:23,560 Bull. 16 00:01:23,560 --> 00:01:24,880 You gotta say bull. 17 00:01:24,880 --> 00:01:34,080 Okay, well not, no it was actually but then it died and the bears took over. 18 00:01:34,080 --> 00:01:38,880 It was up, you see how it was up and then it just dropped off the face of the earth 19 00:01:38,880 --> 00:01:41,040 in the last hour or so. 20 00:01:41,040 --> 00:01:45,880 The Dow was still up a little bit but it's tailing down so we're probably going to end 21 00:01:45,880 --> 00:01:51,480 up the day as a bear market but it was bull all, see it was bull all through the day and 22 00:01:51,480 --> 00:01:54,440 then suddenly something weird happened. 23 00:01:54,440 --> 00:02:01,480 I'm sure that's not going to happen with my guest speaker here, a very bullish investor 24 00:02:01,480 --> 00:02:07,600 but as you can see it's not a spectacular day at all which is kind of weird because 25 00:02:07,600 --> 00:02:14,000 the Dow is the only one that's doing well and the S&P is down a little bit and Nasdaq's 26 00:02:14,000 --> 00:02:15,140 down a little more. 27 00:02:15,140 --> 00:02:22,200 So you're getting that bear market showing up and it's magnifying the riskier the portfolio 28 00:02:22,200 --> 00:02:28,160 the more down it is except for the Dow, who knows what that's about. 29 00:02:28,160 --> 00:02:33,640 But moving over here to crude, crude oil, the bears were really pushing the price of 30 00:02:33,640 --> 00:02:40,760 crude down through the last, since last night and this morning but then there was just this 31 00:02:40,760 --> 00:02:46,120 bull spike and popped up for some reason and now it's just kind of bobbling around. 32 00:02:46,120 --> 00:02:52,480 Some information that pushed the price up right there but as you can see once that information 33 00:02:52,480 --> 00:02:57,400 had been absorbed it just stayed there because there was no more information to push it one 34 00:02:57,400 --> 00:02:58,400 way or the other. 35 00:02:58,400 --> 00:03:04,680 But we're still not, I mean the price of gasoline isn't going to go anywhere significant right 36 00:03:04,680 --> 00:03:05,680 now. 37 00:03:05,680 --> 00:03:12,200 Although there was concern over the weekend and I got some of that scuttlebutt about a 38 00:03:12,200 --> 00:03:20,080 certain politician who made some really kind of scary claims about inviting our enemy to 39 00:03:20,080 --> 00:03:25,680 attack our allies but that kind of rattled everyone for a while but we got over it and 40 00:03:25,680 --> 00:03:29,320 figured well that's tomorrow's problem. 41 00:03:29,320 --> 00:03:36,040 Now going over here, gold and silver about dead in the water right now. 42 00:03:36,040 --> 00:03:42,080 Over here with the 10 year bond, notice it had an odd inverted V pattern. 43 00:03:42,080 --> 00:03:48,920 It began with yields down, prices up, which means that there was buying pressure but then 44 00:03:48,920 --> 00:03:59,880 after a while that buying pressure came off and then there was selling happening and then 45 00:03:59,880 --> 00:04:05,800 right now it's down here which means that the buying pressure has begun again and we've 46 00:04:05,800 --> 00:04:08,280 got a drop here. 47 00:04:08,280 --> 00:04:13,480 Yields are falling, prices are rising so you've got bond investors jumping back in on the 48 00:04:13,480 --> 00:04:16,480 back side of the day down in here. 49 00:04:16,480 --> 00:04:26,400 Now keeping a little bit of mind on this number right here, this is the current yield on the 50 00:04:26,400 --> 00:04:29,240 benchmark, 10 year treasury. 51 00:04:29,240 --> 00:04:34,680 We watched that to get an idea of where interest rates in general are going. 52 00:04:34,680 --> 00:04:41,800 Now it has fallen a lot from where it was even a few months ago so that means interest 53 00:04:41,800 --> 00:04:43,600 rates are going down. 54 00:04:43,600 --> 00:04:49,560 This kind of a holy grail I've been hearing, we're looking for within the next couple of 55 00:04:49,560 --> 00:04:55,720 months to see if it's going to break below 4%, 4%. 56 00:04:55,720 --> 00:05:02,840 I mean with interest rates falling that's great for business activity, consumer spending, 57 00:05:02,840 --> 00:05:05,560 confidence and all of that kind of stuff. 58 00:05:05,560 --> 00:05:07,520 We are loving this. 59 00:05:07,520 --> 00:05:17,240 And so we're kind of looking at will it actually before the spring, well before mid-spring 60 00:05:17,240 --> 00:05:19,920 make it below 4%. 61 00:05:19,920 --> 00:05:25,640 That would bring car loans back down to same levels, mortgage rates would start to behave 62 00:05:25,640 --> 00:05:31,160 themselves like they had for the last few years and all of that would be good news for 63 00:05:31,160 --> 00:05:38,280 you, business activity increases and we've got a strong employment market right now, 64 00:05:38,280 --> 00:05:41,760 getting job people, getting jobs and all this. 65 00:05:41,760 --> 00:05:49,280 So let's kind of keep an eye on that, see if we can creep down slowly toward that crossing 66 00:05:49,280 --> 00:05:57,120 into the 3% range from where we are now, 4.17 and a little bit of change. 67 00:05:57,120 --> 00:06:04,680 But right now it has fallen a little bit, there's a drop of 1.4 basis points so yay 68 00:06:04,680 --> 00:06:05,680 for that. 69 00:06:05,680 --> 00:06:11,680 We need to get it down 17.2 more basis points. 70 00:06:11,680 --> 00:06:15,120 Rolling over here just to see what's happening on the rest of the world. 71 00:06:15,120 --> 00:06:23,520 There was some good news in Tokyo at the beginning of trading last night, last night in our time, 72 00:06:23,520 --> 00:06:29,480 the bulls had their fun but then the bears came in and they smacked it down, the bulls 73 00:06:29,480 --> 00:06:36,960 kind of groveled back but by the end the selling had brought it back down to almost flat for 74 00:06:36,960 --> 00:06:37,960 the day. 75 00:06:37,960 --> 00:06:47,560 If I'm looking at that correctly, yeah, barely up from the beginning of the day. 76 00:06:47,560 --> 00:06:56,280 London, I heard some fellow, he's over in Britain, he said we have an inverted London 77 00:06:56,280 --> 00:06:58,720 bridge happening right now. 78 00:06:58,720 --> 00:07:04,800 The bulls were opening it up, pushing upward and then the bears just slapped it right back 79 00:07:04,800 --> 00:07:08,160 down and held it down underwater. 80 00:07:08,160 --> 00:07:15,520 In the end the bulls had a rally which didn't last but by the end, I think, yeah we're 81 00:07:15,520 --> 00:07:20,720 about at the end now, they've closed now for the day. 82 00:07:20,720 --> 00:07:28,560 It was up just one-hundredth of a percent so it was basically flat for all of that excitement 83 00:07:28,560 --> 00:07:31,760 up and down, flat for the day. 84 00:07:31,760 --> 00:07:35,880 I have to show you one. 85 00:07:35,880 --> 00:07:41,020 This, there are these stocks called penny stocks. 86 00:07:41,020 --> 00:07:46,880 They run anywhere from a couple of cents up to a couple of bucks and they're fun to throw 87 00:07:46,880 --> 00:07:50,240 money at because you know you're probably going to lose. 88 00:07:50,240 --> 00:08:08,040 Well Friday there was a company called BMR, it was the penny stock and then today 658 89 00:08:08,040 --> 00:08:13,240 percent increase in one day. 90 00:08:13,240 --> 00:08:20,160 That would be like you put a hundred dollars into it on Friday afternoon and then today 91 00:08:20,160 --> 00:08:26,320 you collect $650 from the investment in the stock. 92 00:08:26,320 --> 00:08:31,040 Just insane, you don't see that hardly ever. 93 00:08:31,040 --> 00:08:39,680 Anything of that magnitude, a penny stock that just blew the doors off on its way up. 94 00:08:39,680 --> 00:08:48,400 From what I can gather, all of the excitement is about their video technology which is what 95 00:08:48,400 --> 00:08:53,840 Microsoft and several others are now trying to get ready to put into the next generation 96 00:08:53,840 --> 00:09:02,320 of Xbox and all of that or PS2 and Sony is where you use artificial intelligence in its 97 00:09:02,320 --> 00:09:10,560 predictive configuration where it knows what's going to happen or it has a very high probability 98 00:09:10,560 --> 00:09:15,600 of what will happen in the next millisecond in a video. 99 00:09:15,600 --> 00:09:23,120 Then it can make that happen on its own to create this perfectly smooth, extraordinarily 100 00:09:23,120 --> 00:09:28,240 realistic looking environment even in three dimensions. 101 00:09:28,240 --> 00:09:39,120 That will be and apparently this little pissy company has made some pretty impressive advances 102 00:09:39,120 --> 00:09:44,360 which may be embraced by the big dogs because it looks stable and it looks like it's ready 103 00:09:44,360 --> 00:09:47,240 for production or at least close to it. 104 00:09:47,240 --> 00:09:49,640 That's as far as I can hear. 105 00:09:49,640 --> 00:09:51,000 It's just a company. 106 00:09:51,000 --> 00:09:52,680 It doesn't have a beta. 107 00:09:52,680 --> 00:09:56,440 Its PE ratio is not applicable because it's losing money. 108 00:09:56,440 --> 00:10:02,200 You don't have a PE ratio if EPS is below zero. 109 00:10:02,200 --> 00:10:07,880 It doesn't pay a dividend but there you are right there. 110 00:10:07,880 --> 00:10:12,840 Just a monster explosion on the company. 111 00:10:12,840 --> 00:10:14,280 That does happen. 112 00:10:14,280 --> 00:10:19,720 Dreams do come true but it is very, very rare. 113 00:10:19,720 --> 00:10:28,800 Those penny stocks, they stay that way forever and this one is sort of like a Cinderella 114 00:10:28,800 --> 00:10:29,800 tale. 115 00:10:29,800 --> 00:10:35,560 Anyway, if you want to throw money at penny stocks, you can point to this and say, sometimes 116 00:10:35,560 --> 00:10:36,560 it happens. 117 00:10:36,560 --> 00:10:39,560 Anyway, enough of that. 118 00:10:39,560 --> 00:10:48,720 Now, as I said, before I go on to anything else, I had a guest speaker here. 119 00:10:48,720 --> 00:10:53,360 I told him I'd give him a little bit of time. 120 00:10:53,360 --> 00:10:55,400 He's here to talk about bull markets. 121 00:10:55,400 --> 00:10:57,400 There we go. 122 00:10:57,400 --> 00:11:22,120 Good afternoon. 123 00:11:22,120 --> 00:11:25,800 I'm the bull and I'm here to tell you about bull markets. 124 00:11:25,800 --> 00:11:29,960 I want to encourage you to invest because the sky's the limit. 125 00:11:29,960 --> 00:11:32,160 The bull market lives forever. 126 00:11:32,160 --> 00:11:35,240 I have never seen a bear market in my life. 127 00:11:35,240 --> 00:11:39,460 In fact, I'm pretty sure that there is no such thing as a bear. 128 00:11:39,460 --> 00:11:42,560 There is no such thing as a bear. 129 00:11:42,560 --> 00:11:48,760 In fact, I think the bear... Holy milkshake. 130 00:11:48,760 --> 00:12:16,560 I am the bull market. 131 00:12:16,560 --> 00:12:19,560 Let me show analysis. 132 00:12:19,560 --> 00:12:29,160 This is a rough business. 133 00:12:29,160 --> 00:12:32,960 Now let's go to Canvas. 134 00:12:32,960 --> 00:12:40,960 Where the hell was I? 135 00:12:40,960 --> 00:12:49,520 Okay, here, first thing we're going to just do is pull up the financial analysis formulas. 136 00:12:49,520 --> 00:12:53,840 Now we're going to download them. 137 00:12:53,840 --> 00:12:58,680 Download. 138 00:12:58,680 --> 00:13:07,400 Now as I have said, you may have this sheet with you for anything you want. 139 00:13:07,400 --> 00:13:09,480 Bring it to a quiz. 140 00:13:09,480 --> 00:13:11,320 Bring it to an exam. 141 00:13:11,320 --> 00:13:12,320 It is yours. 142 00:13:12,320 --> 00:13:19,040 As a matter of fact, I make a poster out of it, a big poster and hang it in your room. 143 00:13:19,040 --> 00:13:22,300 This is something that will be a conversation starter. 144 00:13:22,300 --> 00:13:28,520 It will turn the conversation to a... I mean, when you start talking about ratios at a party, 145 00:13:28,520 --> 00:13:30,240 that party gets lit. 146 00:13:30,240 --> 00:13:31,760 So here we go. 147 00:13:31,760 --> 00:13:32,760 This is for you. 148 00:13:32,760 --> 00:13:33,760 My hair. 149 00:13:33,760 --> 00:13:34,760 I got fur in my mouth. 150 00:13:34,760 --> 00:13:39,760 Wait. 151 00:13:39,760 --> 00:13:47,840 Oh, like that helped at all. 152 00:13:47,840 --> 00:13:50,040 Oh yeah, it did. 153 00:13:50,040 --> 00:13:55,000 Now look, the next thing we're going to do is over here in files, the one thing that 154 00:13:55,000 --> 00:13:59,520 you want to do here is you find your spreadsheets. 155 00:13:59,520 --> 00:14:06,960 Spreadsheets, spreadsheets. 156 00:14:06,960 --> 00:14:08,440 I hate how they do this. 157 00:14:08,440 --> 00:14:09,440 Spreadsheets. 158 00:14:09,440 --> 00:14:13,800 Okay, now in spreadsheets, something that you'll find there now that's new is class 159 00:14:13,800 --> 00:14:15,560 spreadsheets. 160 00:14:15,560 --> 00:14:21,360 This is where examples that I do in class in Excel, they're just company examples. 161 00:14:21,360 --> 00:14:27,080 I will put them in this class sheets folder every evening after I've done work on them 162 00:14:27,080 --> 00:14:32,320 so that you can pull it up there and have everything right. 163 00:14:32,320 --> 00:14:34,840 That doesn't mean you don't put it in Excel. 164 00:14:34,840 --> 00:14:39,040 Use your Excel by all means while I'm doing this because you've got to get the feel of 165 00:14:39,040 --> 00:14:45,760 how Excel works because the whole business world sort of rests on the shoulders of Excel 166 00:14:45,760 --> 00:14:48,840 and some other things right now. 167 00:14:48,840 --> 00:14:58,120 Soon enough, Excel will become married to Python and just shortly after that, Excel 168 00:14:58,120 --> 00:15:04,600 will become just completely embedded within chat GPTs. 169 00:15:04,600 --> 00:15:08,120 So that's something that's important for you to pick up too. 170 00:15:08,120 --> 00:15:14,800 I'm trying to get a mini course together in building chats that are for business. 171 00:15:14,800 --> 00:15:19,680 Anyway, class spreadsheets, and we've got US Steel up here right now. 172 00:15:19,680 --> 00:15:24,920 So I'm going to pull up US Steel as a download. 173 00:15:24,920 --> 00:15:32,840 I'm going to download it and then we can work on it here together. 174 00:15:32,840 --> 00:15:38,320 There we go. 175 00:15:38,320 --> 00:15:39,320 Top one. 176 00:15:39,320 --> 00:15:40,320 Yes, absolutely. 177 00:15:40,320 --> 00:15:54,640 Now I'm going to go through these ratios with you and make along the way, write down the 178 00:15:54,640 --> 00:15:55,640 explanations. 179 00:15:55,640 --> 00:16:02,880 As I've said, I am not really too excited about you showing me that you can do this 180 00:16:02,880 --> 00:16:05,440 number divided by this number. 181 00:16:05,440 --> 00:16:11,560 In my business, in our world of finance, we need to know what those numbers are telling 182 00:16:11,560 --> 00:16:12,560 us. 183 00:16:12,560 --> 00:16:18,360 Certainly, it's going to benefit us to do the Excel calculations and get the numbers 184 00:16:18,360 --> 00:16:22,160 in there, but then that's not where we stop. 185 00:16:22,160 --> 00:16:25,120 We actually say, okay, why did this happen? 186 00:16:25,120 --> 00:16:27,560 What does this number tell us? 187 00:16:27,560 --> 00:16:32,800 Instead of just saying, I'm done, I've got the numbers, I can go home. 188 00:16:32,800 --> 00:16:38,040 So as we go through these, I'm going to also be pointing out a few stupid pet tricks in 189 00:16:38,040 --> 00:16:44,640 Excel as I proceed with the doing US Steel. 190 00:16:44,640 --> 00:16:45,640 A couple of... 191 00:16:45,640 --> 00:16:50,640 Okay, right off the bat, formatting. 192 00:16:50,640 --> 00:16:51,640 Don't format... 193 00:16:51,640 --> 00:16:56,640 There are a few things you can format, but don't go through and format every blessed 194 00:16:56,640 --> 00:16:58,960 number and every blessed word. 195 00:16:58,960 --> 00:17:03,200 Well, I want that one bold, I better stop doing what I was doing and make it bold or 196 00:17:03,200 --> 00:17:05,040 italics. 197 00:17:05,040 --> 00:17:06,040 Don't do that. 198 00:17:06,040 --> 00:17:13,400 Wait until you've got it done and then go through and make it pretty. 199 00:17:13,400 --> 00:17:16,080 That's just basic efficiency. 200 00:17:16,080 --> 00:17:23,360 Do one task at a time and then you'll have everything right instead of getting yourself 201 00:17:23,360 --> 00:17:26,120 confused like I do all the time. 202 00:17:26,120 --> 00:17:31,160 But you'll also see me along the way just quickly doing something just so you can see, 203 00:17:31,160 --> 00:17:36,480 okay, this is how you do this formatting trick or that formatting trick. 204 00:17:36,480 --> 00:17:40,480 But right off the bat, we have the liquidity ratios, as you can see. 205 00:17:40,480 --> 00:17:43,240 And this mouse is going to be the death of me. 206 00:17:43,240 --> 00:17:46,800 It's double clicking all the time now. 207 00:17:46,800 --> 00:17:50,600 So anyway, so we've got these ratios. 208 00:17:50,600 --> 00:17:53,960 We started last time with liquidity. 209 00:17:53,960 --> 00:17:59,000 And now what I'm going to do is I'm going to copy the liquidity ratios over so that 210 00:17:59,000 --> 00:18:02,840 it captures the previous two years. 211 00:18:02,840 --> 00:18:04,800 Like that. 212 00:18:04,800 --> 00:18:11,200 Yep, this mouse has about had it now. 213 00:18:11,200 --> 00:18:13,200 Seriously. 214 00:18:13,200 --> 00:18:23,560 Control C, control V, control V. My god, this mouse is about, now it's about dead. 215 00:18:23,560 --> 00:18:34,440 Control C, control V. Oh boy, I might not have a mouse today. 216 00:18:34,440 --> 00:18:37,400 I might have to raid the one in my office. 217 00:18:37,400 --> 00:18:42,160 Hang on here. 218 00:18:42,160 --> 00:18:49,040 I can't copy, it won't work on 2021 because the balance sheet went back only two years, 219 00:18:49,040 --> 00:18:53,800 so I don't need to worry about 2021 there. 220 00:18:53,800 --> 00:19:03,160 Now going on though, just to keep this moving with these ratios, I did the liquidity ratios. 221 00:19:03,160 --> 00:19:12,040 Now the next thing I'm going to do here is I'm going to do the profitability ratios. 222 00:19:12,040 --> 00:19:26,040 If I go here to my Excel spreadsheet, wait, oh I see, downloads, let me get that, there 223 00:19:26,040 --> 00:19:28,040 it is. 224 00:19:28,040 --> 00:19:34,200 Okay, there we go. 225 00:19:34,200 --> 00:19:40,760 Oh, will you shut, quit, stop. 226 00:19:40,760 --> 00:19:43,200 Okay, good. 227 00:19:43,200 --> 00:19:47,080 Now let me go through here just briefly. 228 00:19:47,080 --> 00:19:52,400 You get to have this whenever you need it, and so we're just going to follow the formulas 229 00:19:52,400 --> 00:19:55,420 that are shown here on this. 230 00:19:55,420 --> 00:20:02,640 A lot of times I did liquidity first, but the sheet's doing profitability, showing profitability 231 00:20:02,640 --> 00:20:04,080 first, one more of that. 232 00:20:04,080 --> 00:20:09,360 Now one thing that I've got to watch out for here is that the first, I'm going to do gross, 233 00:20:09,360 --> 00:20:11,200 operating and net margins. 234 00:20:11,200 --> 00:20:30,740 So I'm going to go over here, gross margin, net operating margin, and net margin. 235 00:20:30,740 --> 00:20:40,440 A minor caution, I've done a lot of business, I've owned businesses, and I did consulting 236 00:20:40,440 --> 00:20:42,320 for years. 237 00:20:42,320 --> 00:20:51,960 It's funny that this gross margin is used incorrectly quite a bit in the real world. 238 00:20:51,960 --> 00:20:58,120 When they say, well the gross margin, they usually talk, they usually are referring to 239 00:20:58,120 --> 00:21:03,000 sales minus cost of goods sold. 240 00:21:03,000 --> 00:21:08,400 They're talking about the gross margin, and that's not what it is in ratios, and we use 241 00:21:08,400 --> 00:21:11,800 margin only for the ratio. 242 00:21:11,800 --> 00:21:17,240 And speaking of which, let me go over here, I'm going to show you something. 243 00:21:17,240 --> 00:21:24,600 Remember I told you about how financial statements don't always have everything that you want 244 00:21:24,600 --> 00:21:25,600 them to have? 245 00:21:25,600 --> 00:21:33,320 Well, in this case, they don't have gross income, which we need. 246 00:21:33,320 --> 00:21:43,560 Well, where in the heck, is there some reason why this sucks? 247 00:21:43,560 --> 00:21:44,560 Where did that go? 248 00:21:44,560 --> 00:21:47,040 Oh, there it is. 249 00:21:47,040 --> 00:21:55,320 It needs the gross profit, gross income, but it is not here on this company's income statement. 250 00:21:55,320 --> 00:21:59,120 And that's actually not unusual at all. 251 00:21:59,120 --> 00:22:01,640 A lot of companies don't report it. 252 00:22:01,640 --> 00:22:07,160 It used to be required, a mandatory line on the income statement. 253 00:22:07,160 --> 00:22:13,360 The only company I've seen recently, if I remember right, Target, had the gross income 254 00:22:13,360 --> 00:22:14,360 line. 255 00:22:14,360 --> 00:22:18,080 But a lot of companies don't even bother with it now, so I'm going to have to put it in 256 00:22:18,080 --> 00:22:19,640 here. 257 00:22:19,640 --> 00:22:26,360 I'm going to go and highlight row seven, and I'm going to right click, insert, and I'm 258 00:22:26,360 --> 00:22:30,000 going to write here, gross income. 259 00:22:30,000 --> 00:22:33,240 I mean, it's not hard to calculate. 260 00:22:33,240 --> 00:22:40,360 It's just your equal to your sales minus your cost of goods sold. 261 00:22:40,360 --> 00:22:43,880 There you go. 262 00:22:43,880 --> 00:22:46,960 And then I can drag it over a few lines. 263 00:22:46,960 --> 00:22:50,960 There you go. 264 00:22:50,960 --> 00:22:55,800 So I caution you, not just in this one, but in a lot of them, you might have to manually 265 00:22:55,800 --> 00:23:00,160 insert the gross income line. 266 00:23:00,160 --> 00:23:01,160 It's nothing terrible. 267 00:23:01,160 --> 00:23:04,120 It's just a little pain. 268 00:23:04,120 --> 00:23:06,920 And then I can do gross margin. 269 00:23:06,920 --> 00:23:15,400 Now if you look at the formula sheet, gross margin is gross profit or gross income over 270 00:23:15,400 --> 00:23:17,640 sales. 271 00:23:17,640 --> 00:23:20,240 Profit and income are two words for the same thing. 272 00:23:20,240 --> 00:23:31,360 So I will say equals, and I'll go over here to the income statement, gross income, row 273 00:23:31,360 --> 00:23:41,080 cell B7 over total sales, cell B4. 274 00:23:41,080 --> 00:23:46,920 Now try to remember to call out what cells I'm doing, because if you're listening to 275 00:23:46,920 --> 00:23:51,600 the podcast, that's going to make it easier for you to know where I am. 276 00:23:51,600 --> 00:23:54,820 Okay, so we've got gross margin. 277 00:23:54,820 --> 00:24:02,320 Now the next one we want is operating margin, which would be equal to, that is, operating 278 00:24:02,320 --> 00:24:03,320 income. 279 00:24:03,320 --> 00:24:06,920 Well, this company doesn't call it operating income. 280 00:24:06,920 --> 00:24:11,920 They call it earnings before interest and taxes, EBIT. 281 00:24:11,920 --> 00:24:30,600 So we'll just put in equals in the income statement, cell B17 divided by cell B4. 282 00:24:30,600 --> 00:24:38,840 And then finally, net margin equals your net income, your net earnings, whatever you want 283 00:24:38,840 --> 00:24:43,520 to call it, equals, now we've got to go down here and find that stupid thing, there it 284 00:24:43,520 --> 00:24:57,920 is, cell B27 divided by cell B4. 285 00:24:57,920 --> 00:25:09,880 Now these are percentages. 286 00:25:09,880 --> 00:25:15,320 So I'm going to change these to percentages now before I copy them over. 287 00:25:15,320 --> 00:25:18,940 Percentages, now house rules. 288 00:25:18,940 --> 00:25:23,720 Every company has how many decimal places it wants. 289 00:25:23,720 --> 00:25:29,800 For our purposes, usually two is enough, especially for percentages. 290 00:25:29,800 --> 00:25:31,600 For factors, maybe four. 291 00:25:31,600 --> 00:25:39,200 But I'm going to fix these now so that when I copy them over, I said when I copy them 292 00:25:39,200 --> 00:25:49,400 over, yep, this mouse is about had it. 293 00:25:49,400 --> 00:26:00,760 Control C, control V. Okay, calm. 294 00:26:00,760 --> 00:26:01,760 Yeah? 295 00:26:01,760 --> 00:26:17,200 Yeah, that can be used for the net margin. 296 00:26:17,200 --> 00:26:25,360 That would be equals, now I'm going to go back over here to the consolidated income 297 00:26:25,360 --> 00:26:31,440 statement and I'm going to go down to cell B27, net earnings. 298 00:26:31,440 --> 00:26:41,880 And I'm going to divide that slash by total sales, B4. 299 00:26:41,880 --> 00:26:42,880 Got it? 300 00:26:42,880 --> 00:26:43,880 Good. 301 00:26:43,880 --> 00:26:49,920 Now, let me go back and explain myself. 302 00:26:49,920 --> 00:26:55,200 Gross margin, see that 12.46%? 303 00:26:55,200 --> 00:27:06,720 That's telling you that of every dollar in sales, only 12.5 cents survived the wholesale 304 00:27:06,720 --> 00:27:09,480 costs. 305 00:27:09,480 --> 00:27:12,780 That's what that's telling you. 306 00:27:12,780 --> 00:27:16,600 That's what gross margin just says in a nutshell. 307 00:27:16,600 --> 00:27:25,280 Notice how that has collapsed from two years previous when it was about 28.25 cents of 308 00:27:25,280 --> 00:27:26,880 every dollar. 309 00:27:26,880 --> 00:27:35,560 It's now crashed down to 12.5 cents, less than half. 310 00:27:35,560 --> 00:27:41,200 So in other words, as I had mentioned last Wednesday, their wholesale costs are eating 311 00:27:41,200 --> 00:27:43,560 them alive. 312 00:27:43,560 --> 00:27:50,600 Their wholesale costs are going up faster than sales. 313 00:27:50,600 --> 00:27:58,720 Now here's the thing, the first, the easy question, well not an easy question. 314 00:27:58,720 --> 00:28:00,920 Let's try this. 315 00:28:00,920 --> 00:28:12,200 Why would a company let wholesale costs go through the roof without the sales keeping 316 00:28:12,200 --> 00:28:13,680 up? 317 00:28:13,680 --> 00:28:22,240 Why isn't US Steel just passing its wholesale costs along to its customers? 318 00:28:22,240 --> 00:28:26,040 That would keep gross margin from collapsing. 319 00:28:26,040 --> 00:28:27,840 You just pass along your costs. 320 00:28:27,840 --> 00:28:29,560 Your wholesale costs are going up. 321 00:28:29,560 --> 00:28:33,840 You just pass that along to your customers. 322 00:28:33,840 --> 00:28:37,920 Why isn't this company doing that? 323 00:28:37,920 --> 00:28:42,240 It's not easy to answer. 324 00:28:42,240 --> 00:28:43,760 I'm just looking for a genius. 325 00:28:43,760 --> 00:28:46,680 What did you say? 326 00:28:46,680 --> 00:28:47,680 Keep the customer happy. 327 00:28:47,680 --> 00:28:54,440 Well you know, I like to have my customers happy, but I like it if I'm rich more. 328 00:28:54,440 --> 00:29:01,960 If you're sad and I'm sad, that's great, but if you're sad and I'm happy, that's better. 329 00:29:01,960 --> 00:29:06,080 Here's the thing, it's competition. 330 00:29:06,080 --> 00:29:08,360 That's a problem. 331 00:29:08,360 --> 00:29:14,280 In an industry where there's competitive pressure, you can't just pass along your costs, and 332 00:29:14,280 --> 00:29:18,160 steel is a global competitive environment. 333 00:29:18,160 --> 00:29:23,960 You've got countries all over the world cranking out steel, and so you can't just, ah, our 334 00:29:23,960 --> 00:29:26,800 costs went up, we'll just jack that along to the customers. 335 00:29:26,800 --> 00:29:28,340 You can't do that. 336 00:29:28,340 --> 00:29:30,720 It doesn't work. 337 00:29:30,720 --> 00:29:35,160 You can bring up your price a little bit, but you can't pass everything along, not if 338 00:29:35,160 --> 00:29:37,440 your competitors aren't. 339 00:29:37,440 --> 00:29:39,660 They'll just walk right away from you. 340 00:29:39,660 --> 00:29:43,520 This is the same thing that happens in retail, in grocery stores. 341 00:29:43,520 --> 00:29:48,640 You say, well, these prices have just gone through the roof, and of course, obviously 342 00:29:48,640 --> 00:29:54,520 they're passing along their costs, but they are not passing along hardly any of their 343 00:29:54,520 --> 00:29:56,520 costs compared to what they're eating. 344 00:29:56,520 --> 00:30:01,560 US Steel is eating its rising wholesale costs. 345 00:30:01,560 --> 00:30:07,200 Even these stores where you see the price of the groceries going up, you would not believe 346 00:30:07,200 --> 00:30:12,880 how much they would have gone up if all those companies had just passed along their costs. 347 00:30:12,880 --> 00:30:20,680 You see, unless you're a monopoly or an oligopoly, you can't pass along your costs, all of them, 348 00:30:20,680 --> 00:30:25,120 because you've got competitors who are just going to say, we won't, and we'll take your 349 00:30:25,120 --> 00:30:26,600 business. 350 00:30:26,600 --> 00:30:29,160 And so that's what's happening with US Steel. 351 00:30:29,160 --> 00:30:34,960 It's got wholesale costs that it can't pass along, at least not all of them, because it 352 00:30:34,960 --> 00:30:39,060 is in a fiercely competitive industry. 353 00:30:39,060 --> 00:30:45,560 So that's what you're seeing here, and hence, your gross margin is going to erode. 354 00:30:45,560 --> 00:30:54,720 And in this case, they are taking a butt bath on eating their rising wholesale costs. 355 00:30:54,720 --> 00:30:59,840 Operating margin, it's heading down even worse. 356 00:30:59,840 --> 00:31:05,520 Well, operating margin, well, that would mean that their costs aren't going, they are not 357 00:31:05,520 --> 00:31:11,480 cutting costs against gross margin. 358 00:31:11,480 --> 00:31:13,120 They should be cutting their costs. 359 00:31:13,120 --> 00:31:19,040 Well, there's only so much you can cut your costs before you cut into the meat and bleed 360 00:31:19,040 --> 00:31:20,040 to death. 361 00:31:20,040 --> 00:31:24,120 A whole lot of companies think they can just lay off, lay off, lay off. 362 00:31:24,120 --> 00:31:27,240 Well, you can't do that in some industries. 363 00:31:27,240 --> 00:31:31,960 One, the Steelworkers Union wouldn't be letting you do that. 364 00:31:31,960 --> 00:31:37,240 Two is, even if you were laying off people, there's only so many times you can do that 365 00:31:37,240 --> 00:31:40,220 before you run out of people to lay off. 366 00:31:40,220 --> 00:31:45,760 You're cutting into your experience, you're cutting into the morale, and all of that. 367 00:31:45,760 --> 00:31:50,980 So there's US Steel is getting killed on wholesale costs, it's getting killed because it can't 368 00:31:50,980 --> 00:31:58,160 cut operating costs fast enough, and so net margin eats it. 369 00:31:58,160 --> 00:32:05,240 Fortunately, it's kind of unusual, you don't usually see net margin higher than operating 370 00:32:05,240 --> 00:32:13,040 margin, but it looked to me like a couple of things were going on. 371 00:32:13,040 --> 00:32:19,320 They were getting some non-operating income, it looks like, that boosted their net margin, 372 00:32:19,320 --> 00:32:21,640 and possibly there were some tax breaks. 373 00:32:21,640 --> 00:32:28,400 Let me look real quick here, see what was going on with their tax burden. 374 00:32:28,400 --> 00:32:33,280 Yeah, look at that, see that? 375 00:32:33,280 --> 00:32:39,760 They got some tax, they benefit, see how their taxes are much lower in 2023 than they were 376 00:32:39,760 --> 00:32:42,000 in 2022? 377 00:32:42,000 --> 00:32:47,280 That's why the after tax net margin rose a little bit. 378 00:32:47,280 --> 00:32:49,480 That was it right there. 379 00:32:49,480 --> 00:32:55,800 They got some benefits of some tax breaks or something. 380 00:32:55,800 --> 00:32:58,480 And I certainly won't begrudge them that. 381 00:32:58,480 --> 00:33:06,400 Okay, now there are two more profitability ratios that we need to look at. 382 00:33:06,400 --> 00:33:24,480 The first one is return on assets and then return on equity, ROA and ROE. 383 00:33:24,480 --> 00:33:29,120 Now return on assets. 384 00:33:29,120 --> 00:33:43,480 Look at the formula sheet, return on equity, return on assets, net income over total assets. 385 00:33:43,480 --> 00:33:55,020 This is, you are in a, forget the term, metaphorical sense, treating your total assets, everything 386 00:33:55,020 --> 00:34:02,880 the company has, as if it is a single investment. 387 00:34:02,880 --> 00:34:10,700 And net income is how much you made off that ginormous investment. 388 00:34:10,700 --> 00:34:14,280 So this is like the return on your bank account. 389 00:34:14,280 --> 00:34:19,280 You put everything in there and see how much you make on it. 390 00:34:19,280 --> 00:34:30,320 So net income over your total assets equals, now I'm going to go over here to the consolidated, 391 00:34:30,320 --> 00:34:44,160 net income in the income statement B, cell B27 divided by, now I'm going to the balance 392 00:34:44,160 --> 00:34:52,240 sheet and grab the total assets, cell B15. 393 00:34:52,240 --> 00:34:56,080 Now that's a percentage. 394 00:34:56,080 --> 00:34:59,840 Now the next one is return on equity. 395 00:34:59,840 --> 00:35:11,440 If I look at the sheet, ROE, it's net income divided by common stockholders equity. 396 00:35:11,440 --> 00:35:20,000 Now if total assets is liabilities plus owners equity, then this number, return on equity, 397 00:35:20,000 --> 00:35:27,440 has to be larger than return on assets because return on assets takes all of the assets as 398 00:35:27,440 --> 00:35:29,320 a denominator. 399 00:35:29,320 --> 00:35:33,600 Return on equity takes only the owners equity as a denominator. 400 00:35:33,600 --> 00:35:39,280 So the return on equity has a smaller denominator and therefore mathematically, arithmetically, 401 00:35:39,280 --> 00:35:43,060 it will be a larger number. 402 00:35:43,060 --> 00:35:50,280 So we're going to take net income divided by total shareholders equity. 403 00:35:50,280 --> 00:36:02,160 So we say in the calculation sheet, cell B25 equals, I'll take, I can go over here to 404 00:36:02,160 --> 00:36:13,920 the income statement, net income, net earnings, cell B27 divided by, now going over here to 405 00:36:13,920 --> 00:36:19,200 the balance sheet, we've got to go find total shareholders equity. 406 00:36:19,200 --> 00:36:21,600 Where the heck is it? 407 00:36:21,600 --> 00:36:26,280 Where, oh there it is. 408 00:36:26,280 --> 00:36:38,320 Total United States Steel Corporation stockholders equity, cell B36, yes. 409 00:36:38,320 --> 00:36:42,760 And you see it's a little larger, twice as large as the fact. 410 00:36:42,760 --> 00:36:50,040 Now I'm going to turn both of those, highlight those two returns, and I'm going to turn them 411 00:36:50,040 --> 00:36:55,400 into percentages to two decimal places. 412 00:36:55,400 --> 00:37:06,040 So for 2023, ROA was 4.38% and ROE was 8.10%. 413 00:37:06,040 --> 00:37:13,080 And then I'll copy those over to the year previous. 414 00:37:13,080 --> 00:37:15,680 What a disaster. 415 00:37:15,680 --> 00:37:21,960 Both of those have fallen to about a third of what they were. 416 00:37:21,960 --> 00:37:25,720 You see a catastrophe here almost. 417 00:37:25,720 --> 00:37:32,840 It's not the end of the company, but boy they've taken a hit in 2023. 418 00:37:32,840 --> 00:37:41,400 And this is not, well this is the lockdown, no, we were done with the lockdown in 2023. 419 00:37:41,400 --> 00:37:45,600 This is business operations. 420 00:37:45,600 --> 00:37:47,960 Bit the bullet on this one. 421 00:37:47,960 --> 00:37:48,960 Wow. 422 00:37:48,960 --> 00:37:49,960 Okay. 423 00:37:49,960 --> 00:37:54,600 Let me come over here. 424 00:37:54,600 --> 00:37:56,640 Current ratio, okay. 425 00:37:56,640 --> 00:37:59,000 Liquidity, no I did that. 426 00:37:59,000 --> 00:38:02,120 Oh debt, yes debt, absolutely. 427 00:38:02,120 --> 00:38:06,600 The debt ratios. 428 00:38:06,600 --> 00:38:18,600 The first one is debt to total assets. 429 00:38:18,600 --> 00:38:31,800 And the second one is times interest earned. 430 00:38:31,800 --> 00:38:39,500 Now see that first one, debt to total assets, we have a couple of other names for that. 431 00:38:39,500 --> 00:38:43,200 One name for it is capital structure. 432 00:38:43,200 --> 00:38:47,720 The capital structure of the company is, and that's the percent of debt and the percent 433 00:38:47,720 --> 00:38:49,400 of equity. 434 00:38:49,400 --> 00:38:55,400 Now the other thing is that we don't take total liabilities. 435 00:38:55,400 --> 00:39:02,680 All we look at for the debt to total assets is their long term debt. 436 00:39:02,680 --> 00:39:04,440 So let me show you. 437 00:39:04,440 --> 00:39:07,960 Going to in the calculations, cell B28. 438 00:39:07,960 --> 00:39:18,960 I'm going to take equals and I'm going to the balance sheet and I'm going to find long 439 00:39:18,960 --> 00:39:20,840 term debt. 440 00:39:20,840 --> 00:39:25,880 Cell B24. 441 00:39:25,880 --> 00:39:29,240 Use just long term debt for this. 442 00:39:29,240 --> 00:39:37,880 I mean in a purest world we take all the liabilities, but the debt is the 800 pound gorilla. 443 00:39:37,880 --> 00:39:52,080 Divided by total assets, which would be up above cell B15. 444 00:39:52,080 --> 00:39:59,280 Now this is a percentage, so I'm going to here, make it a percentage and make it two 445 00:39:59,280 --> 00:40:00,280 decimal places. 446 00:40:00,280 --> 00:40:01,280 Say that again. 447 00:40:01,280 --> 00:40:09,360 Do it again, watch. 448 00:40:09,360 --> 00:40:11,120 I'm going to do equals by all means. 449 00:40:11,120 --> 00:40:12,960 Ask me to do it again. 450 00:40:12,960 --> 00:40:13,960 That's great. 451 00:40:13,960 --> 00:40:21,400 Equals, I'm going to take only the long term debt. 452 00:40:21,400 --> 00:40:27,080 And this can be a real maze finding what you want in this briar bush. 453 00:40:27,080 --> 00:40:34,560 It's right here, cell B24. 454 00:40:34,560 --> 00:40:43,200 And then I'm going to divide it by total assets, cell B15. 455 00:40:43,200 --> 00:40:50,720 19.95%. 456 00:40:50,720 --> 00:41:05,400 So put in a little bit fancy terms, the capital structure of US Steel is 20% debt. 457 00:41:05,400 --> 00:41:12,160 Now technically what I'm about to say isn't correct, but the capital structure is 20% 458 00:41:12,160 --> 00:41:14,920 debt, 80% equity. 459 00:41:14,920 --> 00:41:19,740 That's not exactly right because we didn't take into account some other liabilities. 460 00:41:19,740 --> 00:41:23,960 But this is a rough measure of it. 461 00:41:23,960 --> 00:41:35,520 This company's total assets are made up of 20% debt. 462 00:41:35,520 --> 00:41:42,440 So they've financed their total assets to the tune of about 20% with debt. 463 00:41:42,440 --> 00:41:47,200 Now is that good or bad? 464 00:41:47,200 --> 00:41:49,960 We'll talk about that in a minute. 465 00:41:49,960 --> 00:41:54,760 However that number by company can be all over the place. 466 00:41:54,760 --> 00:41:59,320 5%, 10%, 80%. 467 00:41:59,320 --> 00:42:07,960 I mean there are even these companies called LBOs that are 100% debt. 468 00:42:07,960 --> 00:42:12,320 There is no equity, but I won't get into that. 469 00:42:12,320 --> 00:42:14,760 Now times interest earned. 470 00:42:14,760 --> 00:42:16,920 Look at the formula. 471 00:42:16,920 --> 00:42:25,600 It says earnings before interest in taxes, operating income, divided by interest expense. 472 00:42:25,600 --> 00:42:30,680 Now look over here at the income statement. 473 00:42:30,680 --> 00:42:38,480 Look, here's the EBIT line, B17. 474 00:42:38,480 --> 00:42:43,160 The very next line is their interest expense. 475 00:42:43,160 --> 00:42:51,640 So EBIT is how much money there is to pay the interest expense. 476 00:42:51,640 --> 00:43:01,720 So times interest earned, just takes the ratio of those, equals EBIT, where the heck, there 477 00:43:01,720 --> 00:43:12,720 it is, cell B17 divided by cell B18, interest expense. 478 00:43:12,720 --> 00:43:19,800 And I'll make that two decimal places. 479 00:43:19,800 --> 00:43:24,560 Dang. 480 00:43:24,560 --> 00:43:26,920 So that's 11.10. 481 00:43:26,920 --> 00:43:33,160 What that's telling you is that the company has enough money right before it pays interest 482 00:43:33,160 --> 00:43:40,360 expense to pay its interest expense 11 times over. 483 00:43:40,360 --> 00:43:43,040 I'll say that again. 484 00:43:43,040 --> 00:43:53,180 11.10 for the times interest earned is saying that they have enough money right before they 485 00:43:53,180 --> 00:44:00,480 pay their interest to pay that interest 11 times over. 486 00:44:00,480 --> 00:44:04,520 Now is that good or is that bad? 487 00:44:04,520 --> 00:44:07,280 First things first. 488 00:44:07,280 --> 00:44:12,440 There is a bad number. 489 00:44:12,440 --> 00:44:20,960 If earnings before interest in taxes were smaller than the interest expense, the company 490 00:44:20,960 --> 00:44:23,420 would be in default. 491 00:44:23,420 --> 00:44:26,320 It would not be able to pay its interest. 492 00:44:26,320 --> 00:44:32,520 And that's the bondholders would walk right in and try to liquidate the company. 493 00:44:32,520 --> 00:44:38,180 And all the company could do is run to bankruptcy court and file for Chapter 11 protection. 494 00:44:38,180 --> 00:44:41,360 So you really want to see that number above one. 495 00:44:41,360 --> 00:44:48,000 And it's really nice if that has some distance above one. 496 00:44:48,000 --> 00:44:56,440 Like for example, you have $120 and you owe $100 in interest. 497 00:44:56,440 --> 00:44:57,720 That's scary. 498 00:44:57,720 --> 00:45:00,200 That's a 1.2 times interest earned. 499 00:45:00,200 --> 00:45:08,560 But if you had $10,000 and you owe me $100, well that's fine. 500 00:45:08,560 --> 00:45:09,560 You see that? 501 00:45:09,560 --> 00:45:11,100 Okay, good. 502 00:45:11,100 --> 00:45:14,200 So higher the better? 503 00:45:14,200 --> 00:45:16,200 No. 504 00:45:16,200 --> 00:45:17,600 It gets into something. 505 00:45:17,600 --> 00:45:22,760 I'm going to tell you another term here for this. 506 00:45:22,760 --> 00:45:30,120 On the calculation sheet, you see that debt to total assets of about 20%, 19.95%. 507 00:45:30,120 --> 00:45:37,120 That is sometimes called leverage. 508 00:45:37,120 --> 00:45:46,320 The problem is that a company that has too much money to pay its interest expense could 509 00:45:46,320 --> 00:45:55,240 borrow money, more money, and still pay its interest expense and use that money to invest 510 00:45:55,240 --> 00:45:57,880 in the company. 511 00:45:57,880 --> 00:46:02,000 Later in the course, I'm going to show you how you can become millionaires. 512 00:46:02,000 --> 00:46:04,400 And I'm not kidding. 513 00:46:04,400 --> 00:46:08,040 Madam, would you like to be a millionaire? 514 00:46:08,040 --> 00:46:09,040 Sure. 515 00:46:09,040 --> 00:46:10,720 No, not sure. 516 00:46:10,720 --> 00:46:14,160 Say yes, please. 517 00:46:14,160 --> 00:46:19,960 But actually, it all hinges on gains to leverage. 518 00:46:19,960 --> 00:46:26,960 You see, because if I, and I'll show you an example of this, how you can make a fortune 519 00:46:26,960 --> 00:46:31,400 in real estate over a period of maybe five years, which people do. 520 00:46:31,400 --> 00:46:34,080 They've been doing it for a long, long time. 521 00:46:34,080 --> 00:46:37,200 But unfortunately, sometimes they get caught on the downside. 522 00:46:37,200 --> 00:46:38,200 Think about it this way. 523 00:46:38,200 --> 00:46:48,320 I've got $100,000 and I'm going to buy a property that I'm pretty sure will go to $110,000. 524 00:46:48,320 --> 00:46:58,800 Well, okay, use all of my equity, $100,000, and come out with $110,000. 525 00:46:58,800 --> 00:47:01,840 I've made a 10% return. 526 00:47:01,840 --> 00:47:11,160 But what would happen if I were, instead of using $100,000, I used $10,000 of my own money 527 00:47:11,160 --> 00:47:21,560 for 10 properties, and then I borrowed $90,000 for each of those properties from a bank? 528 00:47:21,560 --> 00:47:31,520 Well, you see, when the property goes to $110,000, my loan will still, I'll owe back $900,000 529 00:47:31,520 --> 00:47:33,520 plus the interest. 530 00:47:33,520 --> 00:47:37,180 The amount I owe back will not change. 531 00:47:37,180 --> 00:47:43,200 But all that extra that's over that, that's gravy to me. 532 00:47:43,200 --> 00:47:45,560 That's called gains to leverage. 533 00:47:45,560 --> 00:47:53,080 And that's how real estate geniuses make a very large amount of money in a relatively 534 00:47:53,080 --> 00:47:57,040 short number of years, is through that gains to leverage. 535 00:47:57,040 --> 00:48:07,680 And it all hinges on a three-letter designation, OPM. 536 00:48:07,680 --> 00:48:15,360 Madam, do you know what OPM stands for? 537 00:48:15,360 --> 00:48:19,080 You know. 538 00:48:19,080 --> 00:48:22,080 Other People's Money. 539 00:48:22,080 --> 00:48:24,680 It's not even a joke, but it sounds like it. 540 00:48:24,680 --> 00:48:29,880 You see, if I use other people's money and I owe them back a fixed amount with interest, 541 00:48:29,880 --> 00:48:37,360 then if that thing goes way up in price, the gravy is all mine because they don't get any 542 00:48:37,360 --> 00:48:38,680 of that extra. 543 00:48:38,680 --> 00:48:42,760 I get it because I was the equity investor. 544 00:48:42,760 --> 00:48:47,080 That's how we played it in a lot of different games in real estate. 545 00:48:47,080 --> 00:48:54,040 All those different things were, even back a long, long time ago when I was involved 546 00:48:54,040 --> 00:49:00,200 in Indie Movie, bringing the money together, we would use OPM. 547 00:49:00,200 --> 00:49:06,960 Very little of our own money, but then if we could book, I mean, it didn't ever go to 548 00:49:06,960 --> 00:49:10,360 theaters, we just went to VHS and beta tapes. 549 00:49:10,360 --> 00:49:16,620 And then all that extra money we made over the cost of the production, we paid back those 550 00:49:16,620 --> 00:49:22,040 people who had a fixed, we had a fixed obligation to them, and then all the rest of it we got 551 00:49:22,040 --> 00:49:24,760 to keep for ourselves. 552 00:49:24,760 --> 00:49:27,780 It's done in all kinds of different industries. 553 00:49:27,780 --> 00:49:32,320 You just have to find compliant banks who will play the game with you. 554 00:49:32,320 --> 00:49:38,000 And that takes a lot of negotiating and some bullying, but it's doable. 555 00:49:38,000 --> 00:49:40,080 And that's what's going on here. 556 00:49:40,080 --> 00:49:48,280 You've got a company that had its sales go down, for God's sake. 557 00:49:48,280 --> 00:49:50,280 Its sales went down. 558 00:49:50,280 --> 00:49:55,320 Because it's having a hard time with the competition, they can beat its ass on technology, 559 00:49:55,320 --> 00:50:01,120 new technology for steelmaking, for distribution, for the whole nine yards, for extraction. 560 00:50:01,120 --> 00:50:12,420 So this is a company that could say, well, why don't we just borrow a lot more money? 561 00:50:12,420 --> 00:50:20,160 If you look here, they borrowed, oh, they didn't borrow hardly any more money. 562 00:50:20,160 --> 00:50:22,320 And yet, what did they do? 563 00:50:22,320 --> 00:50:31,440 They increased their property, plant, and equipment by close to $2 billion. 564 00:50:31,440 --> 00:50:34,520 And they didn't do it with debt. 565 00:50:34,520 --> 00:50:40,840 And so the equity holders are going to get nothing really out of that. 566 00:50:40,840 --> 00:50:45,040 That is a great failure of this company. 567 00:50:45,040 --> 00:50:47,920 It's just not using OPM. 568 00:50:47,920 --> 00:50:56,000 And so in a very real sense, they're violating their fiduciary duty to their shareholders 569 00:50:56,000 --> 00:51:00,120 by not maximizing the wealth of the shareholders. 570 00:51:00,120 --> 00:51:06,600 And maximizing it in this case would be to get that debt to total assets up there a little 571 00:51:06,600 --> 00:51:07,600 higher. 572 00:51:07,600 --> 00:51:11,800 They've got more than enough money to pay their interest. 573 00:51:11,800 --> 00:51:16,080 So a little more interest is not going to kill them, not at all. 574 00:51:16,080 --> 00:51:20,200 Typically, where do you see that times interest earned, like I said, it can be all over the 575 00:51:20,200 --> 00:51:21,200 place. 576 00:51:21,200 --> 00:51:24,240 You get a little sweaty when it gets too close to one. 577 00:51:24,240 --> 00:51:31,120 I see them a lot in the range of about six up to 12. 578 00:51:31,120 --> 00:51:40,080 But God, there are some companies that have times interest earned like 20, 25 times over. 579 00:51:40,080 --> 00:51:48,680 They're just not using that capital structure to its maximum advantage to their shareholders. 580 00:51:48,680 --> 00:51:53,040 Now granted, over the past few years, interest rates have been damn high. 581 00:51:53,040 --> 00:51:59,000 And a lot of companies have been holding back on long term debt, waiting for interest rates 582 00:51:59,000 --> 00:52:00,080 to go down. 583 00:52:00,080 --> 00:52:01,200 So there is that. 584 00:52:01,200 --> 00:52:03,280 I'll grant them that. 585 00:52:03,280 --> 00:52:06,240 But anyway, there's a lesson from that. 586 00:52:06,240 --> 00:52:11,240 And as I'm going along, what I'm trying to show you is that the numbers are just the 587 00:52:11,240 --> 00:52:13,840 beginning. 588 00:52:13,840 --> 00:52:22,240 This morning, I was driving here, and I got an AI that I can ask questions to. 589 00:52:22,240 --> 00:52:26,560 And I was asking it for the ratios of US Steel. 590 00:52:26,560 --> 00:52:28,480 And it was spinning them out at me. 591 00:52:28,480 --> 00:52:33,880 Of course, I was trying to remember them and not have a car accident at the same time. 592 00:52:33,880 --> 00:52:36,240 What did it say? 593 00:52:36,240 --> 00:52:37,560 This can be done. 594 00:52:37,560 --> 00:52:44,760 The analysis, the think, what if, why, what else? 595 00:52:44,760 --> 00:52:50,760 That's where we can come to the front as humans. 596 00:52:50,760 --> 00:52:56,040 I have a chat GPT that I built for financial analysis. 597 00:52:56,040 --> 00:53:01,920 It's not bad, but it doesn't have that human insight. 598 00:53:01,920 --> 00:53:04,080 It just doesn't have it. 599 00:53:04,080 --> 00:53:06,840 It probably will in a few years, but not right now. 600 00:53:06,840 --> 00:53:10,440 So you've got an advantage if you can just start to ask these kinds of questions. 601 00:53:10,440 --> 00:53:22,000 Now let me go over here to the asset activity. 602 00:53:22,000 --> 00:53:30,480 Now the first one, average collection period. 603 00:53:30,480 --> 00:53:36,280 I'm not going to do it, and I have a very good reason why. 604 00:53:36,280 --> 00:53:39,680 That reason is because I'm lazy. 605 00:53:39,680 --> 00:53:49,680 If you look at the formula, the average collection period in the denominator is average daily 606 00:53:49,680 --> 00:53:57,560 credit sales, which would be total credit sales for the year divided by 360 days. 607 00:53:57,560 --> 00:54:07,880 The problem is that finding credit sales used to be easy, now it's not. 608 00:54:07,880 --> 00:54:13,600 You can use a statement of cash flows to dig it out, but directly you'd have to go to the 609 00:54:13,600 --> 00:54:21,960 notes of the financial statement or to that 10K I showed you and go down to the MDNA and 610 00:54:21,960 --> 00:54:23,640 find it there. 611 00:54:23,640 --> 00:54:30,640 It's not an easy one to find, and I'm not in the mood to have you find it because I 612 00:54:30,640 --> 00:54:34,600 don't care to go searching for it. 613 00:54:34,600 --> 00:54:36,080 So we leave that one out. 614 00:54:36,080 --> 00:54:39,880 You take a higher level course from me, sure we'll have that. 615 00:54:39,880 --> 00:54:43,560 Sure we'll do that, but not today. 616 00:54:43,560 --> 00:54:50,400 Now the next two, especially the next one, with the other two in asset activity are inventory 617 00:54:50,400 --> 00:55:09,520 turnover and asset, total asset turnover. 618 00:55:09,520 --> 00:55:12,560 Inventory turnover. 619 00:55:12,560 --> 00:55:18,080 It's sales divided by inventory. 620 00:55:18,080 --> 00:55:31,160 You take your equals, go over here to the income statement, sell B4 divided by, go to 621 00:55:31,160 --> 00:55:42,720 the balance sheet, find the inventory, sell B4, and there you go. 622 00:55:42,720 --> 00:55:49,020 There's your inventory turnover, 8.49 times. 623 00:55:49,020 --> 00:56:01,540 What that tells you is that this company cleared its warehouses about eight and a half times 624 00:56:01,540 --> 00:56:09,440 last year and then refilled them. 625 00:56:09,440 --> 00:56:14,160 I mean if you were to count, well that one's been here for like eight months, no, it's 626 00:56:14,160 --> 00:56:17,080 overall, overall. 627 00:56:17,080 --> 00:56:23,720 It wiped out its inventory and put in new inventory 8.5 times, about every month and 628 00:56:23,720 --> 00:56:26,320 a half, about every month and a half. 629 00:56:26,320 --> 00:56:31,840 It cleared everything it had and got new in. 630 00:56:31,840 --> 00:56:37,780 Now the total asset turnover goes back to something I said earlier. 631 00:56:37,780 --> 00:56:46,320 If you were to take the entire company and see how many times you sold the whole company 632 00:56:46,320 --> 00:56:51,180 and respond it. 633 00:56:51,180 --> 00:56:58,400 So I'll take equals, sales, again, sell B4 in the income statement, this time divided 634 00:56:58,400 --> 00:57:03,560 by the whole asset, the entire company. 635 00:57:03,560 --> 00:57:13,240 Total assets, sell B15 in the balance sheet, there you go,.88. 636 00:57:13,240 --> 00:57:24,680 So I'm going to make those, oh I'll make them two decimal places and then copy it over, 637 00:57:24,680 --> 00:57:27,960 one period. 638 00:57:27,960 --> 00:57:34,720 Now going back, going back, look at inventory turnover. 639 00:57:34,720 --> 00:57:43,180 I've already talked about this so this is sort of a review, a little more intensive. 640 00:57:43,180 --> 00:57:53,480 A huge thing since the 1990s was to increase that inventory turnover ratio, to get the 641 00:57:53,480 --> 00:57:59,840 inventory in and out, in and out, as fast as you can. 642 00:57:59,840 --> 00:58:02,520 That saves you warehouse space. 643 00:58:02,520 --> 00:58:08,840 Instead of holding inventory that will last six months, you hold inventory that will last 644 00:58:08,840 --> 00:58:11,240 you one month. 645 00:58:11,240 --> 00:58:17,920 That saves inventory warehouse space, the opportunity cost of that space, the lights, 646 00:58:17,920 --> 00:58:21,960 the security, all of that. 647 00:58:21,960 --> 00:58:26,120 If you get everything in and out faster. 648 00:58:26,120 --> 00:58:34,080 Since the 1990s, because the Japanese have a system for, at least in some of their companies, 649 00:58:34,080 --> 00:58:38,320 some of their industries, where they have no inventory. 650 00:58:38,320 --> 00:58:43,680 When they need something, they just have the supplier deliver it to the factory floor, 651 00:58:43,680 --> 00:58:44,920 no inventory. 652 00:58:44,920 --> 00:58:51,480 So in other words, inventory is zero, so sales over inventory is infinity. 653 00:58:51,480 --> 00:58:59,200 Now we can't do that, we tried and it didn't work out too well, but that just in time system 654 00:58:59,200 --> 00:59:08,840 as we call it, but we have been obsessed with increasing inventory turnover ratio. 655 00:59:08,840 --> 00:59:18,760 It started at four, we double, we increase our turnover speed so that we have eight times 656 00:59:18,760 --> 00:59:20,640 a year we turn over the inventory. 657 00:59:20,640 --> 00:59:26,120 So let's keep cranking it, 16 times over, we turn the inventory over, that means less 658 00:59:26,120 --> 00:59:32,280 and less inventory at any given time and a higher and higher inventory turnover ratio. 659 00:59:32,280 --> 00:59:37,200 That was wonderful until the supply chain broke. 660 00:59:37,200 --> 00:59:42,560 And suddenly you had wiped out all of your toilet paper on the shelves, all of your bread 661 00:59:42,560 --> 00:59:49,440 on the shelves, all of your salted snacks on the shelves, all of your pharmaceutical 662 00:59:49,440 --> 00:59:52,880 lightweight stuff like alcohol, hydrogen peroxide, toothpaste. 663 00:59:52,880 --> 00:59:58,360 All of a sudden you sold them all, by golly you got them out of that inventory and sold 664 00:59:58,360 --> 01:00:00,320 them, now let's order more inventory. 665 01:00:00,320 --> 01:00:01,680 Wait what, where's the inventory? 666 01:00:01,680 --> 01:00:04,120 You say you can't get it to us, why can't you? 667 01:00:04,120 --> 01:00:08,360 Oh because your suppliers can't get it to you so you can't get it to us. 668 01:00:08,360 --> 01:00:12,600 As soon as the supply chain started to break down, it just collapsed. 669 01:00:12,600 --> 01:00:18,200 That's why store shelves were empty during the lockdown and they haven't even recovered 670 01:00:18,200 --> 01:00:20,200 yet. 671 01:00:20,200 --> 01:00:26,280 Don't let any of these ingenious tell you, well it was a complex thing with a lot of 672 01:00:26,280 --> 01:00:27,800 different global factors. 673 01:00:27,800 --> 01:00:34,080 Bullshit, it was just that we had been pushing it, pushing it, pushing it until finally, 674 01:00:34,080 --> 01:00:40,360 you sir, I want you to get two assignments done every night. 675 01:00:40,360 --> 01:00:42,840 Well I mean I'm going to increase that to four. 676 01:00:42,840 --> 01:00:47,640 And then fine, okay let's get it to eight, you can push yourself harder and harder. 677 01:00:47,640 --> 01:00:50,280 Well you know what finally happens? 678 01:00:50,280 --> 01:00:56,080 You say FTS before my head explodes. 679 01:00:56,080 --> 01:00:59,200 You can do it only for so long. 680 01:00:59,200 --> 01:01:03,140 It all happened one night when you couldn't do the homework because you'd eaten a Taco 681 01:01:03,140 --> 01:01:08,880 Bell and you couldn't take your homework into the bathroom with you. 682 01:01:08,880 --> 01:01:11,040 I understand, I'm with you there. 683 01:01:11,040 --> 01:01:15,320 Don't send that to me as an excuse in your email, seriously dude. 684 01:01:15,320 --> 01:01:20,880 I've had enough appalling explanations sent to me over the years. 685 01:01:20,880 --> 01:01:30,160 Anyway, that last one was just too much information, too much sharing. 686 01:01:30,160 --> 01:01:33,840 Here we go. 687 01:01:33,840 --> 01:01:38,120 Well this US Steel actually is going the wrong way though. 688 01:01:38,120 --> 01:01:43,080 You do want your inventory turnover ratio to be robust. 689 01:01:43,080 --> 01:01:49,240 Now there is a limit to that, as I said, you've got to have inventory buffer. 690 01:01:49,240 --> 01:01:54,920 That was the thing that was lacking in this speed up the inventory turnover ratio. 691 01:01:54,920 --> 01:02:00,480 You were leaving yourself completely without a buffer. 692 01:02:00,480 --> 01:02:04,120 So we don't want it to go too high, but US Steel is going the wrong way. 693 01:02:04,120 --> 01:02:07,000 Do you see how it actually dropped a little bit? 694 01:02:07,000 --> 01:02:10,000 It wasn't significant, but it did drop. 695 01:02:10,000 --> 01:02:13,040 Now look at the next one. 696 01:02:13,040 --> 01:02:21,080 That's worrisome because we're saying how many times over did this company sell itself 697 01:02:21,080 --> 01:02:24,360 and then respawn? 698 01:02:24,360 --> 01:02:26,680 And that's a low number. 699 01:02:26,680 --> 01:02:32,280 It's not terribly low, but it dropped noticeably. 700 01:02:32,280 --> 01:02:35,400 Fortunately there's a good explanation for why it dropped. 701 01:02:35,400 --> 01:02:38,040 And I showed it to you just a minute ago. 702 01:02:38,040 --> 01:02:41,260 Look at this, look on the balance sheet. 703 01:02:41,260 --> 01:02:47,040 Look at the property plant and equipment from 2022 to 2023. 704 01:02:47,040 --> 01:02:50,480 It went up by almost $2 billion. 705 01:02:50,480 --> 01:02:57,560 So that's a lot more to turn over. 706 01:02:57,560 --> 01:03:06,160 It would be like, madam, you are a total asset. 707 01:03:06,160 --> 01:03:10,080 You are a total asset. 708 01:03:10,080 --> 01:03:21,000 And last year I turned you into a slurpee and I sold you. 709 01:03:21,000 --> 01:03:30,440 Well since that time you have gained a lot of, oh God, I'm going to go with you, bro. 710 01:03:30,440 --> 01:03:33,460 Okay, I'll stick with you. 711 01:03:33,460 --> 01:03:37,160 You gained a lot of weight, about 25%. 712 01:03:37,160 --> 01:03:41,080 Easy, easy. 713 01:03:41,080 --> 01:03:45,920 I don't want to live forever, but I want to live past this class. 714 01:03:45,920 --> 01:03:50,640 Okay, now I turned you into a bigger slurpee. 715 01:03:50,640 --> 01:03:54,520 It's going to be harder for me to turn you over, to sell you. 716 01:03:54,520 --> 01:04:00,880 All in one giant, you know, the giant slurpee you get when you go to the movies, it's like 717 01:04:00,880 --> 01:04:02,640 five gallons. 718 01:04:02,640 --> 01:04:07,800 You are more, so it's going to be harder to turn over the totality of you. 719 01:04:07,800 --> 01:04:10,000 That's what happened here in U.S. Steel's case. 720 01:04:10,000 --> 01:04:15,240 That's why their total asset turnover ratio went down so noticeably. 721 01:04:15,240 --> 01:04:23,080 It was because they put in $2 billion worth of more assets than they had before. 722 01:04:23,080 --> 01:04:29,600 Now my criticism there still is, stands, you did that with equity and retained earnings. 723 01:04:29,600 --> 01:04:34,160 You did not do that with debt, which is what you should have done, because your time's 724 01:04:34,160 --> 01:04:42,320 interest earned could have sustained a lot more interest payments than it has right now. 725 01:04:42,320 --> 01:04:48,960 But nevertheless, that inventory turnover ratio, that asset turnover ratio, did fall, 726 01:04:48,960 --> 01:04:49,960 but there's a good reason. 727 01:04:49,960 --> 01:04:54,240 It's just a lot more assets this year than last. 728 01:04:54,240 --> 01:04:58,160 Okay, good. 729 01:04:58,160 --> 01:05:00,880 Okay, I've got debt. 730 01:05:00,880 --> 01:05:04,000 Okay now, market. 731 01:05:04,000 --> 01:05:12,640 Now the first of these is the price to earnings. 732 01:05:12,640 --> 01:05:19,800 And I will tell you right now that I would not ask you to do it like a ratio. 733 01:05:19,800 --> 01:05:22,600 You go and find it on some financial service. 734 01:05:22,600 --> 01:05:25,800 They all report P-E ratio. 735 01:05:25,800 --> 01:05:32,360 Basically the P-E ratio is the price per share divided by the earnings per share. 736 01:05:32,360 --> 01:05:39,560 Well the problem with doing that as a ratio is that I would be picking the price off that's 737 01:05:39,560 --> 01:05:44,000 bouncing boing, boing, boing, boing, boing all over the place day to day. 738 01:05:44,000 --> 01:05:45,000 The market. 739 01:05:45,000 --> 01:05:47,280 You see how those numbers change all the time. 740 01:05:47,280 --> 01:05:51,980 And the earnings, well you'd have to chase back to some historical number from the financial 741 01:05:51,980 --> 01:05:52,980 statements. 742 01:05:52,980 --> 01:05:58,040 You'd have a market against a financial and that market is so volatile from one, hell 743 01:05:58,040 --> 01:06:01,120 you saw one today that went up by over 600%. 744 01:06:01,120 --> 01:06:05,840 So it's not going to be a good idea to do that one. 745 01:06:05,840 --> 01:06:07,200 Just go and get a service. 746 01:06:07,200 --> 01:06:11,200 I mean I'm sure the book gives you a homework problem where they give you the price, give 747 01:06:11,200 --> 01:06:14,600 you the earnings and all that. 748 01:06:14,600 --> 01:06:15,780 Don't do that. 749 01:06:15,780 --> 01:06:20,080 The next one however is important. 750 01:06:20,080 --> 01:06:31,560 Point to book. 751 01:06:31,560 --> 01:06:38,280 Your textbook earlier, I think it was chapter three, they said that there is this number 752 01:06:38,280 --> 01:06:42,880 takes the market value of the company minus the book value of the company. 753 01:06:42,880 --> 01:06:45,560 That's a terrible way to do it. 754 01:06:45,560 --> 01:06:50,680 Especially because you'd be looking at billion dollar companies and trying to compare those 755 01:06:50,680 --> 01:06:52,540 to million dollar companies. 756 01:06:52,540 --> 01:06:59,080 So the market to book difference, market minus book would be, I mean you couldn't do any 757 01:06:59,080 --> 01:07:00,080 comparison. 758 01:07:00,080 --> 01:07:07,360 Market to book however takes the market value of the company. 759 01:07:07,360 --> 01:07:08,520 That's the market cap. 760 01:07:08,520 --> 01:07:12,680 It's right there for you on any service and divided by the book value. 761 01:07:12,680 --> 01:07:14,720 That's the total shareholders equity. 762 01:07:14,720 --> 01:07:20,960 Now let me explain why this is a very useful thing for you. 763 01:07:20,960 --> 01:07:25,000 Looking around here I've got to find someone I haven't bothered for a long time. 764 01:07:25,000 --> 01:07:30,240 Someone who looks, you sir, I haven't bothered you, that's right you. 765 01:07:30,240 --> 01:07:33,080 The intellectual with the glasses and all that. 766 01:07:33,080 --> 01:07:34,080 Okay here. 767 01:07:34,080 --> 01:07:37,640 You are my son. 768 01:07:37,640 --> 01:07:39,480 It wasn't my fault. 769 01:07:39,480 --> 01:07:40,720 Look. 770 01:07:40,720 --> 01:07:50,960 It was Decatur and truck stop. 771 01:07:50,960 --> 01:07:55,080 I get so much trouble for my Decatur jokes. 772 01:07:55,080 --> 01:07:57,720 Okay listen. 773 01:07:57,720 --> 01:07:58,800 I raised you right. 774 01:07:58,800 --> 01:08:02,960 I spent a quarter of a million dollars to get you to the point where you were out on 775 01:08:02,960 --> 01:08:03,960 your own. 776 01:08:03,960 --> 01:08:06,360 A quarter of a million dollars. 777 01:08:06,360 --> 01:08:11,360 Now you're out there and the future is in front of you. 778 01:08:11,360 --> 01:08:15,560 Okay let me calculate the net present value of the future expected cash flows, his earnings. 779 01:08:15,560 --> 01:08:23,880 I've come out with a number that your value right at that point is five million dollars. 780 01:08:23,880 --> 01:08:27,280 Your market to book therefore is 20. 781 01:08:27,280 --> 01:08:32,400 Five million is what I got out of an investment of 250,000. 782 01:08:32,400 --> 01:08:37,920 Now accounting numbers are historical but this one is important because that book value, 783 01:08:37,920 --> 01:08:43,040 total shareholders equity, that is measuring a real thing. 784 01:08:43,040 --> 01:08:50,760 See when stock, when people buy the stock they become, that money is shareholders equity. 785 01:08:50,760 --> 01:08:57,160 When the company earns money after pays all its bills and pays a dividend, the residual 786 01:08:57,160 --> 01:08:59,080 goes into retained earnings. 787 01:08:59,080 --> 01:09:06,440 So that total shareholders equity is made up of actual money that belongs to the shareholders 788 01:09:06,440 --> 01:09:11,920 that was theirs and built up over the life of that company. 789 01:09:11,920 --> 01:09:14,840 That's the 250,000 dollars. 790 01:09:14,840 --> 01:09:20,320 The market price times the number of those shares outstanding is the market value of 791 01:09:20,320 --> 01:09:22,600 the company. 792 01:09:22,600 --> 01:09:24,720 That's how it works. 793 01:09:24,720 --> 01:09:32,120 So the accumulated, we got this money from stock and we also got this money for the shareholders 794 01:09:32,120 --> 01:09:35,040 from our operations. 795 01:09:35,040 --> 01:09:39,680 That's a whole nine yards of what the shareholders have sacrificed. 796 01:09:39,680 --> 01:09:46,200 The market value over here, let me take this, get over here to Yee-Haw Finance again and 797 01:09:46,200 --> 01:09:47,880 get US Steel up. 798 01:09:47,880 --> 01:09:49,920 There it is. 799 01:09:49,920 --> 01:09:53,200 10.242 billion dollars. 800 01:09:53,200 --> 01:10:00,520 That is what the market says all of that money has created in value. 801 01:10:00,520 --> 01:10:10,440 That 10.242 billion dollars is the five million in my example with them. 802 01:10:10,440 --> 01:10:15,680 So if I took this number and I'll have to, you got to watch it, this is where I screw 803 01:10:15,680 --> 01:10:17,640 up so much. 804 01:10:17,640 --> 01:10:20,980 These numbers, let me go over here to the balance sheet. 805 01:10:20,980 --> 01:10:23,480 See the total shareholders equity here? 806 01:10:23,480 --> 01:10:29,560 Right here, it's the 11,047. 807 01:10:29,560 --> 01:10:31,600 That's in millions. 808 01:10:31,600 --> 01:10:35,120 So that's 11,047 million. 809 01:10:35,120 --> 01:10:39,760 So you got to watch it because usually Yee-Haw Finance gives things in billions. 810 01:10:39,760 --> 01:10:45,440 So I've got to write that top number, the market value in millions. 811 01:10:45,440 --> 01:10:51,520 So what I'll do is I'm going to put it over here and I'm going to, I go over here to the, 812 01:10:51,520 --> 01:10:53,200 I'm going over here. 813 01:10:53,200 --> 01:10:54,720 I have to turn that into millions. 814 01:10:54,720 --> 01:11:00,320 So that would be 10,242 million. 815 01:11:00,320 --> 01:11:01,520 You got to watch that. 816 01:11:01,520 --> 01:11:03,040 It's just one of those things. 817 01:11:03,040 --> 01:11:05,360 I won't make it so that that trips you up. 818 01:11:05,360 --> 01:11:19,920 So I'm going to say 10,242, try that again, equals 10,242, is there some reason this sucks? 819 01:11:19,920 --> 01:11:24,640 Equals 10,242 million. 820 01:11:24,640 --> 01:11:25,640 Why? 821 01:11:25,640 --> 01:11:28,720 You know what? 822 01:11:28,720 --> 01:11:41,880 Equals 10 million equals 10,242,000 and then divide that by the total shareholders equity 823 01:11:41,880 --> 01:11:49,360 on the balance sheet, which is right here. 824 01:11:49,360 --> 01:11:53,400 This company sucks. 825 01:11:53,400 --> 01:11:56,840 This number should be 10, 20. 826 01:11:56,840 --> 01:12:06,760 In other words, what you were saying with that.927, which is about.93, US Steel has 827 01:12:06,760 --> 01:12:16,200 actually devalued the total money put in by shareholders through investment in the stock 828 01:12:16,200 --> 01:12:22,040 or through giving up dividends and letting the company plow back profit. 829 01:12:22,040 --> 01:12:29,640 It was in the last year, let's try, dang. 830 01:12:29,640 --> 01:12:31,640 Really? 831 01:12:31,640 --> 01:12:35,080 Nope, not going to get it. 832 01:12:35,080 --> 01:12:37,440 It was about 1.01 I think. 833 01:12:37,440 --> 01:12:43,000 But one way or the other, this company, it's like putting $10,000 in the bank and the bank 834 01:12:43,000 --> 01:12:50,600 says, well now we got $9,300 of your money. 835 01:12:50,600 --> 01:12:51,600 That's a problem. 836 01:12:51,600 --> 01:12:55,320 US Steel is in trouble. 837 01:12:55,320 --> 01:13:00,640 I will save this and it will be in your worksheets later this afternoon. 838 01:13:00,640 --> 01:13:01,640 That's all I have for you today. 839 01:13:01,640 --> 01:13:22,680 I thank you.