P/B Ratio (Price-to-Book Ratio)

Book value is assets minus liabilities, the residual that belongs to shareholders on the balance sheet. P/B says how many times that residual the market is willing to pay.

Banks, insurers, and other balance-sheet businesses are often discussed on P/B because their assets are closer to financial claims than to a factory brand.

A P/B above 1 means the market values the firm at more than the equity on the books, which is normal when the business earns more than its cost of equity. A P/B below 1 can mean a bargain, or it can mean the assets are overstated or the returns are poor.

Accounting book value misses internally generated brands and can include goodwill that will never be recovered. Compare P/B with return on equity. A low multiple and a low ROE together are not automatically cheap.