The market-to-book value ratio and the Tobin's Q ratio are both indicators of the success of a firm when:
A)their values are both greater than 0.
B)their values are both no less than 10.
C)their values are both less than 0.
D)their values are both less than 1.
E)their values are both greater than 1.

Question

Quizplus · Accepted Answer

Both ratios measure the value of a firm relative to its assets, with a higher value indicating a higher market value or valuation. Therefore, it is optimal for the values to be greater than 1, indicating that the market value of the firm exceeds the value of its assets or investments, indicating a higher level of success.

The Market-To-Book Value Ratio and the Tobin's Q Ratio Are