Tobin's Q is the ratio of the market value of company assets to the replacement costs of the assets. It is not a means to find overvalued stocks (option B) as a high Q value implies that the market value of the firm's assets is greater than the cost to replace those assets. Tobin's Q is also not the same as price-to-book ratio (option C). Therefore, option A is the correct choice.

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Tobin's Q Is

Question 26

Multiple Choice

Tobin's Q is

A) the ratio of the market value of company assets to the replacement costs of the assets.
B) a means to find overvalued stocks: if Q is high it means that the cost to replace a firm's assets is greater than the value of its stock.
C) the same as the price-to-book ratio.
D) Both a and b are correct

Correct Answer: