ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos


Personal Finance Videos 957 videos

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

See All

Principles of Finance: Unit 1, The Sauce Kings 1.0 23 Views


Share It!


Description:

Meet the Sauce Kings. And their Bubbie. And their... Reid. We're going to go on a little BBQ sauce-covered journey with them, as we see what it takes to found a company in America. How do they get capital? What's an entity? What's the difference between a sole proprietorship, a partnership, and a corporation? How much swag should they have on hand?

Language:
English Language

Transcript

00:00

principles of Finance a la shmoop the sauce kings 1.0 once upon a time

00:07

there was a sauce these twin boys are the future sauce kings their bubby which [Man discussing sauce kings]

00:17

is a Jedi named for grandmother had roasted so many pots of the sauce in the

00:23

kitchen at a violent bubble that Artie and Bernie were certain its oils had

00:28

penetrated the paint and were now permanently embedded in the drywall they [Sauce embedding into drywall]

00:33

had cut onions and peeled garlic cloves for the sauce since they were 5 years

00:37

old they had specific roles Artie was the one to organize shop prepare layout

00:42

serve time and so on Bernie salted to taste even though they [Bernie tasting the sauce]

00:47

came out of the same DNA Factory Bernie was physically about twice the size of

00:52

Artie, Bernie knew food and smell and taste

00:55

he was the artiste he was also the only one in the world other than Bubby who

00:59

knew the exact ingredients and formula of the sauce Artie vaguely knew what it

01:05

was but he was about the process Bernie was about the food well friends would [Friend appears at door]

01:10

fight to be invited for dinner when bubby was cooking the sauce solved

01:14

family arguments calmed nervous girlfriends and was rumoured to enhance

01:19

the growth of hair had pavlov been there bells would have been ringing over veal [Pavlov ringing a bell]

01:24

chops the sauce was magic Marky Minkelman visited one day with the meal

01:29

finished he asked for the recipe when they laughed and politely said no Marky [Marky asking for recipe and people laugh]

01:35

offered to pay for it and then insisted and then offered to pay a lot the demand

01:41

made the room uncomfy well Artie Bernie and Bubby sent Marky packing with a

01:45

gallon of sauce no recipe but in Artie's mind a bright light went off they had [Light appears above Arties head]

01:50

something with only modest career aspirations and with both boys attending

01:54

a local college Artie and Bernie began working 25 hours a week trying to figure

01:59

out how to sell the sauce well Bubby looked at the concept as flattery a way

02:03

of spreading her love of food and family meals all around the world it was her [Sauce squirted on map of world]

02:08

recipe but she couldn't have been more flattered and energized

02:11

to work with the boys the venture took 10 years off her life in a good way for

02:16

a while the boys just barbecued rows and rows of chops in front of the house the [Chops roasting on a barbecue]

02:20

smoke was a scented siren song lines were long the guys realized they needed

02:25

a dozen barbecues and that they could fill a dozen neighborhoods or more but

02:30

they couldn't afford the barbecues with the profits they were making maybe one

02:34

barbecue a month assuming finals didn't kill them they

02:37

needed capital well luckily one day a well schooled well-fed venture

02:42

capitalist named Reid was standing in line he looked like a true connoisseur [Reid running away with a plate of chops]

02:47

of the sauce he tasted juices drooled and he waited for closing time then he

02:52

introduced himself hello fine fellows I would like to invest in you I think you [Reid approaching the twin boys]

02:58

could have the best barbecue sauce in the world together with little capital

03:02

we could make a fortune..well, Bernie was stunned and not hugely interested but he

03:07

did want resources with which to experiment so he could create other

03:11

varieties of the sauce could the flavor be applied to salads or hors d'oeuvres

03:16

or chapstick what about chapstick and Artie was already trying to figure out

03:20

the process who got paid what for what that is if Reid puts in a dollar what

03:25

percent ownership of the company does that dollar buy him [Artie looking at barbecue profits]

03:28

after gathering the basic information or doing his due diligence Reid made a

03:33

formal offer to invest $500,000 for a 1/3 ownership in the sauce company...Artie

03:39

and Bernie realized that this valued their existing veal chop stand in the

03:43

barbecue and sauce formula behind it at a total of 1.5 million dollars..Artie and

03:49

Bernie heard $500,000 and then a big buzzing sound in their ears their [Bernie hears buzzing sound and pokes finger in his ear]

03:53

collective experience with finance involved numbers with a whole lot fewer

03:57

zeroes so the concept of getting 500 grand was well foreign to say the least

04:02

and Bubby said take money but Artie being the more cautious of the brothers

04:07

said wait we should go say hi to uncle Hy and so they tripped off to Uncle

04:12

Hy the family consigliere and day to day job lawyer Hy explained how they

04:17

could set up this new company this notion of birthing a company involves

04:20

the concept of entity what exactly is the legal

04:24

form for how the sauce company will do business well the first in simplest form [Man discussing flavors of partnership]

04:30

of a company, Hy explained is the sole proprietorship doesn't take much to

04:35

establish almost nothing in fact you start a business by yourself and poof

04:39

you fill out a form mail it in and you're a sole proprietorship you are the

04:44

man but that won't work here because we have not one but three proprietors well

04:49

next up in complexity he said is the partnership while partnerships are also [Uncle Hy discussing partnerships]

04:54

simple to establish and you can have any number of partners greater than one

04:59

The biggest problem is that you can lose everything even

05:03

more than you put into the business say some yutz slips on a banana peel in a

05:07

factory you own and are responsible for operating he sue's you and he wins he [Man celebrates in court]

05:12

can go after everything everything you own even more than just literally taking

05:17

away your key to the front door of the business you built yourself your house

05:21

your car your savings and your little dog too this is the concept of unlimited

05:26

liability well naturally the boys agreed that unlimited liability was something

05:31

to be avoided so a partnership was out there had to be another way for this

05:35

company to be established then Hy whispered two letters....L-P...A limited

05:41

partnership as the name suggests involves partners whose overall risk is [Limited partnership definition appears]

05:46

limited to whatever they invest in a partnership if they invest 100 bucks

05:50

well that's the most they can lose hence the catchy word limited in there there

05:55

are however some drawbacks with this approach because a limited partnership

05:59

requires that the limited partners must be passive investors limited partners

06:03

can't be involved with decisions and managing the partnership because if they [Woman appears at office window]

06:07

do well then they lose that limited liability protection they are perceived

06:12

legally to be unlimited partners and if the banana peel slipping lawsuit happens [Man slips on banana peel]

06:17

well then they can lose everything since Artie and Bernie planned to be

06:20

involved the limited partnership didn't seem to be the answer by the way a quick

06:24

note to future wall street Wizards out there if you ever raise money for a [Boy raising money for a hedge fund]

06:29

hedge fund or a venture capital fund you will raise it from passive investors who

06:34

will be your yes limited partner you running the fund with the big

06:39

swinging hat will be the general partner the LP's give you money and then they go

06:45

play golf you manage the day-to-day dough reporting to them monthly or [Boy swimming in a pool of cash]

06:49

quarterly so uncle Hy said there's another vehicle here to be driven the

06:53

corporation the corporation has the benefits of limited liability and the

06:58

shareholders or stockholders if you prefer are permitted to manage the

07:01

business or at least be involved in it it's the best of both worlds and so the

07:06

boys formed the sauce company Inc and Reid was its first investor capitalizing [Reid and boys celebrating opening of Sauce Company Inc]

07:11

it with his 500 grand that sauce is really starting to cook here

Related Videos

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Fake News
11938 Views

How do you tell fake news from real news?

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

Finance: How Are Risks and Rewards Related?
589 Views

How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...