Yes, he’s simplifying by assuming the home owner’s other assets and liabilities are small enough that they can be ignored. And also, there are different ways to do valuation.
The “book value” of equity according to accounting is just (assets - liabilities) and doesn’t include the company’s own future earnings. That’s what’s discussed in the article. Stock is also referred to as equity and its market value is whatever the market believes a company is worth and presumably does include future earnings according to whatever crystal ball it uses.
In this case we assume a house (valued at its purchase price) is the only asset. I get 4:1 though, assuming debt:equity.
It’s simple math, but definitions can be tricky and the article would be a whole lot clearer if he showed his work.
The “book value” of equity according to accounting is just (assets - liabilities) and doesn’t include the company’s own future earnings. That’s what’s discussed in the article. Stock is also referred to as equity and its market value is whatever the market believes a company is worth and presumably does include future earnings according to whatever crystal ball it uses.
In this case we assume a house (valued at its purchase price) is the only asset. I get 4:1 though, assuming debt:equity.
It’s simple math, but definitions can be tricky and the article would be a whole lot clearer if he showed his work.