Quick question on P/B ratio
When calculating PB ratio, can you use the projected book value?
Also, can the book value be the total equity on the balance sheet or it has to be the book value of all outstanding shares?
if you use projected book, you are basically doing a forward P/B ratio, which is fine, although I don't know when you'd do that. It's more likely you'd use forward EPS or forward EBITDA to get a forward Price-to-X multiple.
The second question is confusing...book value is just the value of the assets minus intangible assets (shit you can't sell). To get P/B it's [Price / (book value - liabilities)].
Some people consider book value to be tangible - intangible - liabilities, too.
It sounds like Assets - Liabilities = Equity.
So can you say that P/B is ( Price / Total Equity per Share)
It's Tangible Assets - Liabilities. For some firms that could be a huge difference. Remember, if you were going to sell your firm to the world, it can't buy goodwill or other intangible items you carry on your BS.
Sequi ut deleniti vel dolores. Dolor cum fugiat non reprehenderit quae.
Consectetur esse hic blanditiis culpa laboriosam et veritatis. Porro sint alias ut amet consequatur est. Eum sint odit numquam iusto nesciunt qui voluptatum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...