price-to-asset ratio

Price-to-Book

A ratio of the share price of a publicly-traded company to its book value per share, which is the company's total asset value less the value of its liabilities. The P/B is a ratio of investor sentiment on the value of a stock to its actual value according to the Generally Accepted Accounting Principles. A high P/B means either that investors have overvalued the company, or that its accountants have undervalued it.

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price-to-asset ratio

A ratio that compares a firm's stock price with its book value per share. A low ratio indicates the firm's assets are not being fully valued by investors or the assets are being overvalued on the firm's financial statements. If the former is the case, the company may be a candidate for a takeover attempt.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.