BioPlus is a firm in the biotech industry.They have 2 million shares outstanding with a recent market price of $15.00.Their total assets are $18 million and total liabilities are $8 million.The average price-to-book (PB) ratio for the biotech industry is 5.Which of the following statements about BioPlus is true?

Question

Quizplus · Accepted Answer

BioPlus's PB ratio is calculated as (Market Cap / Book Value). Market Cap is 2 million shares * $15.00 = $30 million. Book Value is Total Assets - Total Liabilities = $18 million - $8 million = $10 million. Thus, PB ratio = $30 million / $10 million = 3. This is below the industry average of 5, which could indicate the shares are undervalued and potentially an attractive investment.

BioPlus Is a Firm in the Biotech Industry