🔎 Market to Book Ratio

The Market to Book ratio is simply the ratio between the Market Value (Market Cap) of a firm and its Book value.

Market-to-Book ratio for the entire firm :

    Market-to-Book ratio = Market Capitalization / Book Value

Market-to-Book ratio per share :

  Market-to-Book ratio = Share Price / Book Value per Share

YOU GET EXACTLY THE SAME NUMBER, SO USE EITHER FORMULA.

Market Cap = Share price X shares outstanding

✏️ The current market to book ratio for Microsoft as of February 05, 2021 is 14.02. The share price is 242.20. What is its book value per share?

1.) Identify equation:

  Need to know - Book value per share

  Already know - Share price, market to book ratio

Equation to connect them:

  Market-to-Book ratio = Share Price / Book Value per Share

2.) Plug into the equation:

3.) Solve the equation (“chug” 🚂).

⇨ Check using original equation