P/B Ratio (Price To Book Ratio)

P/B Ratio:

P/B ratio of a company is another financial indicator which represents the price of individual shares of a company compared to its book value. Thus, if the price of individual shares of a company is divided by its book value, the outcome would be the company’s P/B ratio.

P/B Ratio= Price of individual shares ÷ Book value

Here price denotes the 'current price of individual shares' of a company and book value is meant as '(entire assets of a company - liabilities and debts) ÷ total number of shares'.

For example:

Price of individual shares of a company is 230 INR.
The company has a book value of 180 INR.

This would mean that the P/B ratio of the said company would be 230 / 180= 1.27.

A stock which has a P/B Ratio beneath 1.5 - 2.0 is considered a relatively safe stock. Thus, the lower the P/B Ratio would be than its sectoral competitors, the better the stock might be.