NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
A stock has a face value of ₹10 and a market price of ₹450. Its book value per share is ₹150. What is its price-to-book (P/B) ratio?
The price-to-book ratio is 3.0, found by dividing the market price of ₹450 by the book value per share of ₹150. Face value is irrelevant to this ratio, and inverting the fraction would give book-to-price instead.
- A3.0Correct
- B45.0
- C0.33
- D15.0
Explanation
P/B = market price / book value per share = 450 / 150 = 3.0. Using face value (450/10 = 45) is the wrong base. Inverting the ratio gives 0.33, which is book to price.
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