Meaning and calculation
How does the stock market value a business relative to the net book value recorded on its balance sheet? Price-to-book divides total market capitalization by common stockholders equity.
P/B = common equity market capitalization ÷ common book equity
Source references: FINRA: Defining the Value of an Investment
A hypothetical worked example
Hypothetical: Dividing a market capitalization of USD 100 million by common equity of USD 60 million produces a P/B ratio of approximately 1.67.
What can make this comparison misleading?
Book equity reflects historical accounting values rather than current liquidation value, making P/B misleading for asset-light or intellectual-property businesses.
What to record beside the number
- The filing URL, document section and issuer identity.
- The reporting period, currency, units and whether the figure is reported or calculated.
- The exact formula and any missing inputs or differences in definitions.
Sources & corrections
Prepared with AI assistance and automated source and calculation checks. No independent human analyst review is claimed. Hypothetical examples and historical data are identified in the text.
Use the linked primary sources to check definitions and company disclosures. Filings and service details can change; verify the relevant period before relying on a figure.
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