Market test ratios relate the current price per share to the return that accrues to investors.

Question

Quizplus · Accepted Answer

Market test ratios, such as the price-to-earnings ratio (P/E ratio) and price-to-book ratio (P/B ratio), compare the current market price per share of a company to its earnings or book value. These ratios help investors determine whether a company's stock is overvalued or undervalued relative to its earnings or assets.

Market Test Ratios Relate the Current Price Per Share to the Return