Which one of the following statements about market and book value is correct?

Question

Quizplus · Accepted Answer

The market-to-book (M/B) ratio compares a firm's market value to its book value. The book value is based on the firm's assets, liabilities, and equity, while the market value is determined by the stock price and the number of outstanding shares. While some firms may have a M/B ratio above 1, indicating that the market value is higher than the book value, not all firms will have a ratio above 1. It is possible for a firm's market value to be lower than its book value, resulting in a M/B ratio of less than 1. Therefore, option D is the correct choice.

Which One of the Following Statements About Market and Book