What is the formula for calculating the market to book ratio?

The formula to calculate the market to book ratio is very simple. You divide a company's market capitalization by its book value. Market cap is calculated by multiplying the stock price by the number of shares outstanding. The simplest way to calculate book value is by subtracting all liabilities from all assets.

What factors influence the market to book ratio?

The Market to Book ratio (or Price to Book ratio) can easily be calculated in Excel if the following criteria are known: share price, number of shares outstanding, total assets, and total liabilities. From there, market capitalization and net book value can be calculated. Market Cap is equal to share price times shares outstanding.

How is the market to book ratio used in valuations?

The market to book ratio is a valuation metric used to compare the price of a stock to its book value. It is also called the price to book (P/B) ratio. You can calculate the market to book ratio by dividing a company's market cap by its book value. The book value is calculated by subtracting a company's liabilities from its assets.

What is the difference between market value and book value?

Book value and market value are ways to evaluate a company. Book value is based on its balance sheet; market value on its share price. If book value is higher than market value, it suggests an undervalued stock. If the book value is lower, it can mean an overvalued stock.