Which one of the following is true concerning the market-to-book ratio?
A) Extending the depreciation life of a firm's assets will increase the market-to-book ratio.
B) A decrease in the price of the stock on the stock exchange will increase the market-to-book ratio.
C) An increase in the market value of the common stock will increase the market-to-book ratio.
D) The market-to-book ratio is of most interest to the creditors of a firm.
E) The market-to-book ratio provides the selling price of a firm's inventory.

Question

Quizplus · Accepted Answer

The market-to-book ratio is calculated by dividing the market value of a company's shares by its book value. Therefore, an increase in the market value of the common stock directly increases the market-to-book ratio, as it increases the numerator in this calculation.

Which One of the Following Is True Concerning the Market-To-Book