P/B ratio

Definition of P/B ratio

P/BV ratio is a price-to-book value (of equity) ratio and the book value of equity is the difference between the book value of total assets and the book value of liabilities. This multiple is employed to compare the value of a company to others’ in the simplest way since book values are stable and often possible to compare to market prices. Moreover the valuation of companies even with negative earnings which are troublesome for the P/Eratio as well as DCF valuation model is not as big of an obstacle with P/BV ratio. But book values depend on accounting standards and principles and thus, make it difficult to compare with companies in other countries.