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Q Ratio

   Also found in: Wikipedia 0.01 sec.
Q ratio
The ratio of stock prices to the current replacement values of the firms' underlying assets. Some analysts believe a relatively high Q ratio (higher than 1.0, although the level is subjective) indicates an overbought market. Also called Tobin's Q.
Q Ratio
A ratio of a company's market value to its total asset value. The Q ratio is based on the work of James Tobin, who suggested that a fairly priced company ought to have a price equal to its total asset value. Thus, a Q ratio of less than one means that the market value of the company is less than the total asset value, indicating that it is undervalued. Likewise, a Q ratio of more than one indicates that the market value is higher than the total asset value and that the company might be overvalued.


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