The formula to calculate the Price-to-Book (P/B) Ratio is:
\[ \text{Price-to-Book Ratio} = \frac{\text{Share Price}}{\text{Book Value per Share}} \]
The formula to calculate the Book Value is:
\[ \text{Book Value} = \text{Total Stockholder Equity} - \text{Preferred Equity} \]
The formula to calculate the Book Value per Share is:
\[ \text{Book Value per Share} = \frac{\text{Book Value}}{\text{Number of Shares Outstanding}} \]
The formula to calculate the Tangible Book Value is:
\[ \text{Tangible Book Value} = \text{Book Value} - \text{Total Intangible Assets} \]
The formula to calculate the Tangible Book Value per Share is:
\[ \text{Tangible Book Value per Share} = \frac{\text{Tangible Book Value}}{\text{Number of Shares Outstanding}} \]
The formula to calculate the Price-to-Tangible-Book (P/TB) Ratio is:
\[ \text{Price-to-Tangible-Book Ratio} = \frac{\text{Share Price}}{\text{Tangible Book Value per Share}} \]
The Price-to-Book (P/B) Ratio measures a company's market value compared to its book value. The book value represents the company's net asset value, calculated as total stockholder equity minus preferred equity. The Price-to-Tangible-Book (P/TB) Ratio further refines this measure by excluding intangible assets from the book value.
Let's assume the following:
To calculate the Book Value:
\[ \text{Book Value} = 100,000,000 - 20,000,000 = 80,000,000 \]
To calculate the Book Value per Share:
\[ \text{Book Value per Share} = \frac{80,000,000}{5,000,000} = 16.00 \]
To calculate the Price-to-Book (P/B) Ratio:
\[ \text{Price-to-Book Ratio} = \frac{50.00}{16.00} = 3.13 \]
To calculate the Tangible Book Value:
\[ \text{Tangible Book Value} = 80,000,000 - 10,000,000 = 70,000,000 \]
To calculate the Tangible Book Value per Share:
\[ \text{Tangible Book Value per Share} = \frac{70,000,000}{5,000,000} = 14.00 \]
To calculate the Price-to-Tangible-Book (P/TB) Ratio:
\[ \text{Price-to-Tangible-Book Ratio} = \frac{50.00}{14.00} = 3.57 \]
Therefore, the Price-to-Book (P/B) Ratio is 3.13, and the Price-to-Tangible-Book (P/TB) Ratio is 3.57.
