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I have not read Robert Kyosaki's book(s), but apparently he uses the words "assets" and "liabilities" in a different way than it is defined in the world of accounting.
Thank you for this clear explanation :) I have a few questions! 1) At 2:43 you mentioned "increasing ROA is generally a good thing", when would be the case when it's a bad thing? 2) At 3:22 regarding renting not being considered an asset, I assume it's also not considered a liability. a) Is this because the rent payments are being payed off quickly versus Accounts Payable which may take longer to pay off? b) When does a payment (ex. rent payment) become considered a liability? c) If it's not an asset nor a liability, what is it? Is it some term like "cost of operations"?
Thank you for your feedback and questions! Regarding 1) "increasing ROA is generally a good thing": a) the company could be underinvesting in new assets (the denominator in the ratio) and thereby limiting its future earnings potential, b) the company could be maximizing its profitability at the expense of customer satisfaction, employee satisfaction or product safety, which may hurt them in the future, in other words current period ROA looks good but it may deteriorate. Regarding 2) Expense in the income statement, usually settled in the same period as the expense occurs (debit expense, credit cash).
wow i love this explanation. I owe 40K only and i earn 26k, own a polo vivo, own a plot no house yet as i still stay with my mother. I am not so bad after all. I dont wana make loans immidiately. One question. Is salary regarded as Asset?
Hi! Asset, liabilities and equity go onto the balance sheet (the overview of what you own and what you owe at a point in time), while salaries go into the income statement. If you earn more than you spend (during a month, during a year), you can pay down debt and/or build equity! Does that help?
Iv'e seen liabilities like cars become assets. Attention can drive traffic. Traffic can be converted into cash flow. Also, If you put the car in the name of an entity that you control such as an LLC, then you could deduct the car and maintenance from your taxable income. Therefore, a liability can also be turned into an asset! Flex..
I prefer to stick to the very simple and straightforward accounting definitions of assets being what you own, and liabilities what you owe. The rest sounds like sophistry to me.
@@TheFinanceStoryteller Without applied knowledge you can become a liability to yourself. Simply put, you are an asset. Not sophistry (argument with intention of deceiving), just going a little deeper. However, I like simplicity so people can grasp the concept first.
Equity represents the amount owed to shareholders. On the balance sheet, we put what we own on the left (assets), and what we owe on the right (liabilities and equity).
Nope, the accounting equation states that assets is always equal to liabilities and equity: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-OYql7Y9NnBg.html
HI FST, i don't understand why we add liabilities and assets together to get equity, surely you want to Take away liabilities away from assets so you are left with equity ?
Hi Craig! Assets = Liabilities + Equity. This is the same as Equity = Assets - Liabilities. See also my video on the accounting equation: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-OYql7Y9NnBg.html
@@TheFinanceStoryteller ahhhh so it’s starts with the minus amount first ! How can you tell the item is a negative value in the balance sheet as it doesn’t always have -, is it just because you know it says liabilities? Your the best ! You help so much!
The first question that I would ask is: does she feel the same way about you? ;-) Second step: watch my video on sunk costs: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-kVFGXomwvxg.html
Hello sir, your video is certainly well expounded! Although I have an inquiry. If it’s true that a person’s true financial wealth is based upon their equity, how can you know if a person has low or high equity? It’s not possible to ask a wealthy person straight up if their sports car or mega yacht is a liability or not. How can you communicate in a way to find out exactly if people are financially wealthy?
It's one of the mysteries in life.... One of the ways to find out is whether they still drive that car or sail that yacht after a financial downturn. 😉 Other than that, no way to ask this politely, and even if you ask, no way to know whether you are getting an honest answer.
@@TheFinanceStoryteller Thank you so much! ☺️ I will definitely use this new knowledge in future situations. As of right now, I’m only a junior in high-school trying to figure my path in life. 😅 Btw, I’m quite impressed that you are still replying to comments on a video posted over a year ago, I’ve totally learnt something new! One final question, do you have any advice or tips on how to “make friends” with or, communicate with the right people for future cooperations? What characteristics in a person should I specifically be looking for? And what characteristics should I be avoiding?
Personally, I look out for people that share common interests (sports, music, art, etc.), and then see whether I feel positive energy with people (focused on growth, energetic, etc.).
Hi Annnku! Not sure what you are looking for.... is this question specifically related to this video, or are you looking for a generic description of business transactions? Here's a video that goes through the business steps as well as the financial steps of setting up a small company, maybe that helps: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-wZdaVEX41WQ.html
Hi Bashir! Self-control is the key for cash not to evaporate. And there are large benefits of having sufficient liquidity available, see my video on liquidity: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-XtjS7CfUSsA.html
