Sports Management Companies: Sources of Financing
There are many sports management companies across the world that can be classified as large corporations. Many of these corporations or franchises have assets worth several millions of dollars. Hence, an average person will assume that the sources of financing for sports franchises are also similar to that of other corporations. However, this is not […]
Hire Purchase Agreements
Buying Assets on Installments A hire purchase agreement is a particular type of agreement between a buyer and seller. The asset being sold in this case is generally a fixed asset. Also, the amount that has to be paid, is not paid in one single payment. Rather the payment is done in instalments over a […]
Cultural Influences on Financial Decisions
The financial decisions made by an investor are actually influenced by several factors that are present in their thought process. We have discussed about the rational aspects of traditional financial theory. We have also discussed about emotional aspects and behavioral biases in the previous articles. However, emotions are not the only thing that impact behavior. […]
How Ultra Long Term Bonds Work?
In September 2018, Austria became the latest developed country to issue ultra-long-term bonds. As per the deal, Austria raised a total of $4.2 billion which have to be paid back after 100 years! The interest rates on this bond were 2.11%. This deal is being called the largest ever issue of bonds which have a […]
Poor Risk Management at the Silicon Valley Bank
The entire world is still trying to grapple with the failure of the Silicon Valley Bank. The impact has been felt across the United States economy and even across the entire world. It is obvious that since the impact has been significant, a lot of time will be spent trying to analyze if this financial […]
Price to Book Value = Current Market Price / Total Assets – Intangible Assets
The value of assets is taken from the most recently published balance sheet.
The price to book value ratio looks at an immediate liquidation scenario. Investors therefore compare the price that they are paying for the company against what they would receive if the business shut operations right away.
The price to book value ratio can be used to make some serious interpretations about the business of the company and how the market is reacting to it. Here are some of the common interpretations made on the basis of price to book value ratio:
The analyst must therefore look at a low price to book value ratio as a starting point to understand which of the two is the reality.
Investors who had an eye on the Price to Book Value ratio found that even if the company wound up its operations at its book value, they would still be left with more book value per share than the then prevailing market price per share. Such bets are usually risky because it is difficult to trust the book value stated on financials that have been admitted to be doctored with.
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