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The price-to-book ratio (P/B) is a commonly used benchmark comparing market value to the accounting book value of the firm's assets. The price/sales ratio and EV/sales ratios measure value relative to sales. These multiples must be used with caution as both sales and book values are less likely to be value drivers than earnings.
The price-to-book ratio, or P/B ratio, (also PBR) is a financial ratio used to compare a company's current market value to its book value (where book value is the value of all assets minus liabilities owned by a company). The calculation can be performed in two ways, but the result should be the same.
Tobin's q [a] (or the q ratio, and Kaldor's v), is the ratio between a physical asset's market value and its replacement value. It was first introduced by Nicholas Kaldor in 1966 in his paper: Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani .
When analyzing stocks or companies to invest in, there are different ratios for gauging financial health. The price-to-book ratio (P/B) is one way to evaluate a stock's value, something that may ...
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Simple example If an investor owns 10 shares of a stock purchased for $4 per share, and that stock now trades at $6, the "mark-to-market" value of the shares is equal to (10 shares * $6), or $60, whereas the book value might (depending on the accounting principles used) equal only $40.
P/B ratio is emerging as a convenient tool for identifying low-priced stocks that have high growth prospects. Skip to main content. 24/7 Help. For premium support please call: 800-290-4726 ...
X 4 = ratio of market value of equity to book value of total liabilities. Adds market dimension that can show up security price fluctuation as a possible red flag. X 5 = ratio of sales to total assets. Standard measure for total asset turnover (varies greatly from industry to industry). Altman found that the ratio profile for the bankrupt group ...