The P/B ratio stands for Price-to-Book Ratio
It's a financial measure that compares the price of a company's stock to its book value.
It's a financial measure that compares the price of a company's stock to its book value.
Imagine a Nariyal Paani Wala 🥥as a company, and its assets, such as the cart and equipment, as the book value.
The P/B Ratio helps us understand the relationship between the shop's price and the value of its assets.
The P/B Ratio helps us understand the relationship between the shop's price and the value of its assets.
How to Calculate P/B Ratio?
P/B Ratio = Market Value of the business / Book Value of Assets
Let's understand with an example ⤵️
P/B Ratio = Market Value of the business / Book Value of Assets
Let's understand with an example ⤵️
Let's say the market value of the Nariyal pani wala shop is ₹10,000, and the total value of its assets (cart, equipment, etc.) is ₹5,000.
We can now calculate the P/B ratio:
P/B Ratio = ₹10,000 (price of the shop) / ₹5,000 (book value of assets)
P/B Ratio = 2
We can now calculate the P/B ratio:
P/B Ratio = ₹10,000 (price of the shop) / ₹5,000 (book value of assets)
P/B Ratio = 2
What Does the P/B Ratio Indicate?
The P/B ratio gives us insights into whether the shop's stock (the nariyal pani vala shop) is overvalued or undervalued in relation to its assets.
The P/B ratio gives us insights into whether the shop's stock (the nariyal pani vala shop) is overvalued or undervalued in relation to its assets.
➡️If the P/B ratio is less than 1, it suggests that the stock might be undervalued.
➡️In other words, you could be getting a good deal by paying less than the value of the assets.
➡️In other words, you could be getting a good deal by paying less than the value of the assets.
➡️If the P/B ratio is greater than 1, it indicates that the stock might be overvalued.
➡️Paying more than the value of the assets could be risky.
➡️Paying more than the value of the assets could be risky.
Remember, the P/B ratio is just one tool among many used in Fundamental Analysis.
To learn more about this vast topic, watch the Value Investing on Quest course - bit.ly
#DumpYourFears
To learn more about this vast topic, watch the Value Investing on Quest course - bit.ly
#DumpYourFears
جاري تحميل الاقتراحات...