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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Ratio interpretation
Good day sir,
I would like to ask about the market-to-book ratio. A ratio of less than 1, is considered as good or bad? because I saw some interpretation mentioned that it means the company is undervalued in which the investors are willing to pay merely less than one dollar for every dollar of book value that a company has, so it is bad. However, some interpretation says it is good to have less than 1 because the stock is undervalued in which case it can be seen as a good investment because the stock price is expected to bounce back.
May I know which interpretation is more appropriate? or it depends on the investors or company view? If company view, higher or lower than is good and why?
Thanks sir
Hi,
You won’t see this ratio in the exam, so I’d not worry about it too much.
Thanks