NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
A company's shares have a face value of ₹10 and trade at ₹250. Its book value per share is ₹125. What is its price-to-book value ratio?
The price-to-book ratio is 2 times, found by dividing the market price of ₹250 by the book value per share of ₹125. Using the face value of ₹10 as the denominator is the wrong base, and inverting gives 0.5.
- A25 times
- B12.5 times
- C2 timesCorrect
- D0.5 times
Explanation
P/B = market price / book value per share = 250 / 125 = 2 times. Dividing by face value gives 25, which is the wrong base. Inverting the ratio gives 0.5.
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