Sample Thesis Paper
The PBV Ratio is calculated by dividing the Market Price of the share of a company by the Book Value per Share. Book Value per Share is the Share holders’ Equity divided by the number of shares. The PBV ratio indicates how much is being paid by the share holders for the assets of a company. If the Price of a share is lower than Book Value, it means that the stock price might be understated and this represents an opportunity for investors to buy at a lower price (Loth 2009).
This ratio is widely cited by researchers which compare the price of a company’s share to its book value. Book value is the value of net assets less its outstanding debt and represents the value of the share if a company discontinues its operations and all its assets are sold off after paying its debt. However, the value of PBV varies from industries for example a software company will have lower tangible assets and will have a higher PBV ratio while banks having all its assets in investments and advances will have comparatively lower PBV value (Stovall 2008)