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price/book value ratio

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What is the rationale for using the price/book value ratio as a measure of relative value?

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Solution Summary

What is the price/book value or the price-equity ratio and how to calculate it.

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The price/book value ratio is a ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. Also known as the "price-equity ratio".

Calculated as: Stock price/[(Total assets - liabilities)/total number of shares]

A lower P/B ratio could mean that the stock is ...

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