Ten Stock Analysis Ratios Used By The Pros: Price-to-Book

Third Key Ratio :

 Price-to-Book

This ratio focuses on what would be retained if the business was sold off immediately. It takes the total assets and subtracts the total liabilities to produce the ‘book’ value – the amount that would be left if everything was liquidated. Note that intangible assets (brands, patents) are ignored in the book value as they are difficult to value and sell. A lower Price-to-Book will be attractive as an investor will not be paying too much for the potential leftovers of a company in the case of bankruptcy.

Formula:

Market Capitalization


Book Value

Price-to-Book= Market Capitalisation/Book Value

Book Value = Total Assets – Intangible Assets – Total Liabilities

To download a complete PDF of all the ratios we will be talking about in this article, please complete the form below.

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