ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price to Book
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Price to Earnings
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EV to EBITDA
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Price to Sales
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Detailed explanation-1: -The average P/B ratio for banking firms, as of the first quarter of 2021, is approximately 1.28. P/B is sometimes calculated as an absolute value, dividing a company’s total market capitalization by the book value from the company’s current balance sheet. The calculation is sometimes done on a per-share basis.
Detailed explanation-2: -Valuation Multiples – Banks and Insurance The two key valuation multiples for both banks and insurance firms are P / E (Price Per Share / Earnings Per Share) and P / BV (Price Per Share / Book Value Per Share). “Book Value” just means Shareholders’ Equity, occasionally with some adjustments.
Detailed explanation-3: -What Is the Price-to-Book (P/B) Ratio? Many investors use the price-to-book ratio (P/B ratio) to compare a firm’s market capitalization to its book value and locate undervalued companies. This ratio is calculated by dividing the company’s current stock price per share by its book value per share (BVPS).
Detailed explanation-4: -Market Multiples The market multiple approach is the simplest way to value a bank. A common multiple used by bank analysts is the Price-Earnings ratio (P/E).