Enter the total market capitalization and the total book value. The calculator will evaluate and display the market to book value.
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Market to Book Value Formula
The following equation is used to calculate a market-to-book value ratio.
MBV = MC / BV
- Where MBV is the market-to-book value ratio
- MC is the market capitalization of the company
- BV is the book value.
What is a Market-to-Book Value Ratio?
Market-to-Book Value Ratio (M/B) is a financial metric used to assess the relationship between a company’s market value and its book value.
The market value represents the current market price of a company’s shares. In contrast, the book value represents the net value of a company’s assets, calculated by subtracting liabilities from total assets.
This ratio is important as it provides insights into how the market perceives a company’s worth of its accounting value.
A high M/B ratio indicates that investors value the company more highly than its book value, suggesting positive market sentiment and potential future growth.
A low M/B ratio suggests that the company is undervalued or facing challenges, potentially indicating an investment opportunity.
The M/B ratio is particularly relevant for investors and analysts as it helps in evaluating a company’s financial performance and making investment decisions.
It allows investors to compare a company’s market value to its book value, indicating whether the stock is overpriced or underpriced. By comparing the M/B ratio of a company to its industry peers or the overall market, investors can identify potential investment opportunities or market trends.
Market to Book Value Example
How to calculate market-to-book value?
- First, determine the market cap.
Calculate the total market capitalization of the company.
- Next, determine the book value.
Calculate the total book value of the stock.
- Finally, calculate the market-to-book value.
Use the equation above to calculate the market-to-book value.
A market-to-book value is the ratio of the market capitalization of a company to it’s book value.