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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)

In equity analysis, the price-to-book value (P/B) ratio of a company is calculated by dividing the market price per share by which of the following?

The price-to-book ratio is market price per share divided by book value per share. It shows how the market values a company relative to the net worth recorded in its books. Dividing by EPS gives the P/E ratio instead, and dividing by sales per share gives price-to-sales.

  1. AEarnings per share
  2. BBook value per shareCorrect
  3. CDividend per share
  4. DSales per share

Explanation

P/B compares market price with the net worth attributable to each equity share, i.e., book value per share. Dividing by EPS gives P/E, by dividend per share gives a price-to-dividend measure, and by sales per share gives price-to-sales.

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