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Tobin's Q Ratio

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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.


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124 Debt Total Tobin's q Ratio ROA Assets Executive ratio Foreign ratio Bank ratio Company ratio Tobin's q 1.
Finally, firms are excluded if cumulative returns, dividend yields, and changes in shares outstanding cannot be calculated because of missing data from the Center for Research in Security Prices (CRSP) monthly tapes, or i f there is insufficient data on the COMPUSTAT tapes to calculate the firm's average book-to-market ratio, its Tobin's Q ratio, or its ratio of capital expenditures to property, plant and equipment for three prior and two years after they are listed on Value Line.
We conclude that, on average, the marginal and average Tobin's Q ratios differ for firms in the sample.
 
 
 
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