Valuation ratios · Question 8 of 12

What does the price-to-book ratio (P/B) relate to each other?

1 answer is correct. Easy

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Answer

  • B Market value and book equity

Explanation

The P/B ratio compares the price with the book value, i.e. the balance sheet equity per share. A P/B of 1 means the market values the company exactly at its book value. The ratio is particularly common for banks and insurers.

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