What is the ratio of the book to the market?

The ratio of the book to the market is a mathematical comparison of the actual value of society to its market value. The actual value of the company is determined by internal accounting and its market value is its market capitalization. In general, the result of this comparison can be used to determine whether the company is overvalued or undervalued. Analysts can then evaluate the company's ordinary share as potential investments, which will often lead to a public upgrade or downgrades of this shares. The accounting value must be obtained from the company and can usually be derived from the notifications of earnings that most companies have done every three months. In general, the market value is equal to the market capitalization of the company, which can be calculated by multiplying the price of its shares by the total shares it has issued.

The ratio of the book to the market greater than one suggests that the company can be underestimated and many investors take it as a sign that this is a good investment. This is because gaining a ratio greater than one requestAdds an accounting value to exceed the market value, which may indicate that investors do not provide a loan they deserve. Similarly, the ratio of the book to the market less than one suggests that the company can be overvalued, and many investors take it as a sign that it may be time for cash in its shares. The reason is that in order to be less than one ratio, the company's market value must exceed its accounting value, which means that the investment public may have given too much credit.

Earnings announcements can create opportunities for investors because they cause adjustments to the book market. When the company announces its income, these earnings will join the previous OOK bodies, causing an increase in the ratio of the book and the market. Investors will normally have a growing ratio to the sign that the company is doing well and can be worth investing. This additional investment increases the company's market value and again closer to one.

one historical problemUsing the ratio of the book to the market as an investment guide is that some companies were known for dishonest accounting. Examples of rogue accounting create artificially high book conditions to the market that attract investors. When the actual accounting value of the company that does, the ratio of the book to the market, followed by the price of the company's shares, is finally revealed.