Follow the cash

To understand business agreements, you need to follow the cash. This may sound simplistic, but it's often made difficult by design. When agreements are opaque, those with information advantages can easily make money from those that don't understand the subtleties of the opportunity being presented to them.

In my real estate class, we read what looked like a prospectus for a leasing deal, but after following the cash flows, the relationship seemed closer to a mortgage agreement. It's easy to be distracted by terms like lessor or lessee. In reality, all I want to understand is the interactions between the parties involved.

All of this is to say, never sign a contract that you don't fully understand. Make sure you understand what everyone is getting out of the deal and how much you are going to be paying for what.