What does Tobin's Q measure?
A)The difference between the book value and market value of a company
B)The rate of change in a company's share price across a year
C)The extent of the contingent liabilities of a business
D)The total annual size of a company's cash inflows and outflows.

Question

Quizplus · Accepted Answer

Tobin's Q is a ratio that compares the market value of a company to its book value. It is used as an indicator of the overall efficiency of a company's investments. A value of greater than 1 suggests that the market values the company more than its assets, while a value of less than 1 suggests the opposite.

What Does Tobin's Q Measure