Stock Market Math: essential formulas for selecting and managing stock, risk [PDF]

Summary
Here on this page, we have provided the latest download link for Stock Market Math: essential formulas for selecting and managing stock, risk PDF. Please feel free to download it on your computer/mobile. For further reference, you can go to degruyter.com

Stock Market Math: essential formulas for selecting and managing stock, risk Book

A problem with book value is what it includes and excludes. Under GAAP, companies are not required to report pension liabilities even when they are huge. At the same time, numerous inflated intangible assets such as goodwill distort book value, and the market value of the real estate may be far greater than the acquisition price minus depreciation.

The price-to-book by itself is not meaningful, but if you track it as a trend over time, you may discover that a company is being perceived as more valuable or less valuable (based on this ratio). Most analysts agree that market value is a factor of revenue and earnings more than book value, but this serves as a good confirming test.

A more reliable version of this is the price to tangible book value per share, in which intangible assets are removed from the equation. This formula at least is more likely to approximate a “liquidation value” of a company since goodwill and other intangibles cannot be given a sales value. The tangible book value per share is more widely used by analysts than the unadjusted book value, but under GAAP it continues to present problems with accuracy.