Tobin's Q Ratio

Tobin's Q Ratio

A ratio of a company's market value to its total asset value. Tobin's 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, when Tobin's Q ratio is less than one, it means that the market value of the company is less than the total asset value, indicating that it is undervalued. Likewise, when it is more than one, it indicates that the market value is higher than the total asset value and that the company might be overvalued. Tobin's Q ratio is also called simply a Q ratio.
References in periodicals archive ?
These attributes were: Tobin's q ratio, intangible assets to total assets ratio (IntanTA), cash flow to sales ratio (CFsales), auditor opinion (AUOP), capital expenditure to property, plant & equipment ratio (CapInt), and advertising expense to sales ratio (AdvSale).
1]: There is no statistically significant difference in Tobin's q ratios between "pre-crisis" and "post-crisis " years.
In this article, we'll look at two additional market valuation tools, Tobin's Q Ratio and Robert Shiller's C.
Tobin's Q Ratio was developed by James Tobin, recipient of the 1981 Nobel Prize in Economic Sciences.
Tobin's Q ratio for company I in year t; (Tobin qit)
Tobin's Q ratio has been proposed as an important technique for the assessment of managers' operations.
firm becoming a target of a foreign company and the Tobin's q ratio.
after adjusting for changes in purchasing power over the life of the debt contract), the numerator of the Tobin's q ratio will be overstated in real terms making it harder to reject the null hypothesis.
Skandia AFS, an insurance company in Stockholm, Sweden, uses a variant of Tobin's Q ratio to measure the value of ideas.
Although Tobin's q ratio is ideal, we can not compute the Tobin's q ratio for many cases due to incomplete data.
We conclude that, on average, the marginal and average Tobin's Q ratios differ for firms in the sample.
Our procedure for estimating Tobin's q ratios for each firm follows the Perfect and Wiles (1994) method: