Question

what types of companies have a low pe ratio and a high market to book ratio?

what types of companies have a low pe ratio and a high market to book ratio?

Homework Answers

Answer #1

THE PE RATIO IS CALCULATED BY DIVIDING CURRENT SHARE PRICE BY EARNING PER SHARE.

FORMULA: CURRENT SHARE PRICE

                   EARNING PER SHARE

THE REASONS FOR LOW PE RATIO COULD BE :

1. LOWER SHARE PRICE OF COMPANY'S SHARE.

2. HIGH EARNING PER SHARE

MARKET TO BOOK RATIO

THE RATIO SHOWS THE MARKET VALUE RELATIVE (MARKET CAPITALIZATION) TO BOOK VALUE WORTH OF COMPANY.

THIS SHOWS THAT HOW MUCH EQUITY INVESTORS ARE PAYING FOR EACH DOLLAR IN NET ASSETS.

THE HIGH MARKET VALUE IS FOR COMPANIES WHOSE MARKET CAPITALIZATION IS HIGHER OR THE BOOK VALUE IS LOW.

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