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Options
-
Assets might be available at a lower/cheaper than market price
Correct answer
- B
The company’s assets are overpriced
- C
The company is generating strong profits
- D
The P/B ratio is irrelevant for valuation
Why this is the answer
The P/B ratio compares a company’s market price per share to its book value per share, reflecting net assets. A low P/B ratio indicates the stock is trading below the book value, suggesting the company’s assets may be undervalued relative to the market. High P/B ratios, in contrast, may indicate overvaluation. The ratio is a key tool for investors assessing potential bargains in equity valuation.
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