← Glossary · Financial ratios
P/B ratio (price-to-book)
Market value compared with the equity shown on the balance sheet.
The P/B ratio divides the share price by book value per share, i.e. the equity on the balance sheet. A P/B of 1 means the market values the company exactly at its book value.
P/B is most useful for banks, insurers and companies with many physical assets. For software or brand companies, whose value hardly shows on the balance sheet, a high P/B is normal.