Price-to-Book Definition

Dictionary of Financial Terms

Current share price divided by the most recently reported book value. Price-to-book is a particularly useful valuation criteria for financial companies, where the book value is more likely to reflect real underlying assets, than for industrial companies.

Beware of share buybacks, leveraged buyouts and mergers and acquisitions. All three will reduce book value and, because they are one-time events, decrease the usefulness of a company's price-to-book ratio.

Definitions of Financial Terms