What is the formula for calculating the Price-Book Ratio?

The Price-Book Ratio (P/B Ratio) is a financial metric used to evaluate a company's relative valuation by comparing its market value to its book value. The correct method of calculating the P/B Ratio is to take the market value per share and divide it by the book value per share. This formula reflects how much investors are willing to pay for each dollar of net assets or equity on the company's books.

The reasoning behind using market value and book value is that the market value reflects what investors believe the company is worth based on its current price in the market, while the book value represents the value of the company's equity as recorded on its financial statements. A P/B ratio greater than 1 may indicate that the market values the company's future growth prospects, while a ratio less than 1 might suggest the market sees potential issues or undervaluation.

Other options do not accurately reflect how the P/B ratio is calculated, distinguishing them from the correct option that captures the essence of this key financial ratio.