Price-to-book ratio

The price-to-book ratio divides a share's market price by its book value of equity per share, showing how many euros investors pay for each euro of net assets recorded on the balance sheet.

ByHoang TruongUpdated July 11, 2026

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A company reports total shareholders' equity of €40,000,000 and 8,000,000 shares outstanding, giving a book value per share of €40,000,000 ÷ 8,000,000 = €5.00. Its shares trade at €12.00, so the price-to-book ratio is €12.00 ÷ €5.00 = 2.4: investors pay €2.40 for every €1.00 of book equity.

Where it fits

SubjectCorporate FinanceCoreTopicBusiness Valuation & DCFCoreTopicBond & Equity ValuationCore

The formula

LaTeX

P/B = \frac{P}{E \div n}

Variables

$P / B$: Price-to-book ratio (×)
$P$: Market price per share (€ per share)
$E$: Total shareholders' equity (€)
$n$: Number of shares outstanding (shares)

Compares the market price of a share to the accounting book value of equity backing each share.

Check yourself

PracticeCORE

A company reports total shareholders' equity of €75,000,000 and has 5,000,000 shares outstanding. Its shares trade at €18.00. What is its price-to-book ratio?

Select an answer to check your understanding.