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Friday, August 5, 2011

How to Calculate Price to Book Ratio

Price to Book (P/B) Ratio is a financial ratio used to compare a stock's market value with the book value. It is also known as the market-to-book ratio or the price-to-equity ratio. A higher ratio indicates that the company has better future prospects. P/B can be calculated as follows:

Formula:
P/B ratio = Market capitalization / Book value of equity
OR = Price per share / Book value per share.

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