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Market-book ratio

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Definition of Market-book ratio

Market-book Ratio Image 1

Market-book ratio

market price of a share divided by book value per share.



Related Terms:

Market to Book Ratio

Measure of the book value of a company on a per share basis. It is
calculated by dividing the book value of the company by the
number of common shares outstanding.


DLOM (discount for lack of marketability)

an amount or percentage deducted from an equity interest to reflect lack of marketability.


QMDM (quantitative marketability discount model)

model for calculating DLOM for minority interests r the discount rate


Acid-test ratio

Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
items to current liabilities.


Appraisal ratio

The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
deviation.



Articles of incorporation

Legal document establishing a corporation and its structure and purpose.


Asset/equity ratio

The ratio of total assets to stockholder equity.


Market-book Ratio Image 2

Asset activity ratios

ratios that measure how effectively the firm is managing its assets.


Auction markets

markets in which the prevailing price is determined through the free interaction of
prospective buyers and sellers, as on the floor of the stock exchange.


Bear market

Any market in which prices are in a declining trend.


Black market

An illegal market.


Book

A banker or trader's positions.


Book

cash A firm's cash balance as reported in its financial statements. Also called ledger cash.


Book profit

The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.


Book runner

The managing underwriter for a new issue. The book runner maintains the book of securities sold.


Book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
company's book value might be more or less than its market value.


Book value per share

The ratio of stockholder equity to the average number of common shares. book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).


Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.



Brokered market

A market where an intermediary offers search services to buyers and sellers.


Bull market

Any market in which prices are in an upward trend.


Bulldog market

The foreign market in the United Kingdom.


Capital market

The market for trading long-term debt instruments (those that mature in more than one year).


Capital market efficiency

Reflects the relative amount of wealth wasted in making transactions. An efficient
capital market allows the transfer of assets with little wealth loss. See: efficient market hypothesis.


Capital market imperfections view

The view that issuing debt is generally valuable but that the firm's
optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net
corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of
asymmetric information, asymmetric taxes, and transaction costs.


Capital market line (CML)

The line defined by every combination of the risk-free asset and the market portfolio.


Capital rationing

Placing one or more limits on the amount of new investment undertaken by a firm, either
by using a higher cost of capital, or by setting a maximum on parts of, and/or the entirety of, the capital
budget.


Capitalization ratios

Also called financial leverage ratios, these ratios compare debt to total capitalization
and thus reflect the extent to which a corporation is trading on its equity. Capitalization ratios can be
interpreted only in the context of the stability of industry and company earnings and cash flow.


Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.



Cash flow from operations

A firm's net cash inflow resulting directly from its regular operations
(disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing
securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net
income.


Cash markets

Also called spot markets, these are markets that involve the immediate delivery of a security
or instrument.
Related: derivative markets.


Cash ratio

The proportion of a firm's assets held as cash.


Common market

An agreement between two or more countries that permits the free movement of capital
and labor as well as goods and services.


Common stock market

The market for trading equities, not including preferred stock.


Common stock ratios

ratios that are designed to measure the relative claims of stockholders to earnings
(cash flow per share), and equity (book value per share) of a firm.


Complete capital market

A market in which there is a distinct marketable security for each and every
possible outcome.


Concentration account

A single centralized account into which funds collected at regional locations
(lockboxes) are transferred.


Concentration services

Movement of cash from different lockbox locations into a single concentration
account from which disbursements and investments are made.


Controlled foreign corporation (CFC)

A foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.


Conversion ratio

The number of shares of common stock that the security holder will receive from
exercising the call option of a convertible security.


Corner A Market

To purchase enough of the available supply of a commodity or stock in order to
manipulate its price.


Corporation

A legal "person" that is separate and distinct from its owners. A corporation is allowed to own
assets, incur liabilities, and sell securities, among other things.


Cost-benefit ratio

The net present value of an investment divided by the investment's initial cost. Also called
the profitability index.


Coverage ratios

ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.


Current ratio

Indicator of short-term debt paying ability. Determined by dividing current assets by current
liabilities. The higher the ratio, the more liquid the company.


Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.


Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.


Dealer market

A market where traders specializing in particular commodities buy and sell assets for their
own accounts.


Debt/equity ratio

Indicator of financial leverage. Compares assets provided by creditors to assets provided
by shareholders. Determined by dividing long-term debt by common stockholder equity.


Debt market

The market for trading debt instruments.


Debt ratio

Total debt divided by total assets.


Debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.


Declaration date

The date on which a firm's directors meet and announce the date and amount of the next
dividend.


Derivative markets

markets for derivative instruments.


Direct search market

Buyers and sellers seek each other directly and transact directly.


Dividend payout ratio

Percentage of earnings paid out as dividends.


Dollar duration

The product of modified duration and the initial price.


Domestic International Sales Corporation (DISC)

A U.S. corporation that receives a tax incentive for
export activities.


Domestic market

Part of a nation's internal market representing the mechanisms for issuing and trading
securities of entities domiciled within that nation. Compare external market and foreign market.


Duration

A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.


Earnings retention ratio

Plowback rate.


Edge corporations

Specialized banking institutions, authorized and chartered by the Federal Reserve Board
in the U.S., which are allowed to engage in transactions that have a foreign or international character. They
are not subject to any restrictions on interstate banking. Foreign banks operating in the U.S. are permitted to
organize and own and Edge corporation.


Effective duration

The duration calculated using the approximate duration formula for a bond with an
embedded option, reflecting the expected change in the cash flow caused by the option. Measures the
responsiveness of a bond's price taking into account the expected cash flows will change as interest rates
change due to the embedded option.


Efficient capital market

A market in which new information is very quickly reflected accurately in share
prices.


Efficient Market Hypothesis

In general the hypothesis states that all relevant information is fully and
immediately reflected in a security's market price thereby assuming that an investor will obtain an equilibrium
rate of return. In other words, an investor should not expect to earn an abnormal return (above the market
return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis
exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all
publicly available information) and strong form (stock prices reflect all relevant information including insider
information).


Either-way market

In the interbank Eurodollar deposit market, an either-way market is one in which the bid
and offered rates are identical.


Emerging markets

The financial markets of developing economies.


Equilibrium market price of risk

The slope of the capital market line (CML). Since the CML represents the
return offered to compensate for a perceived level of risk, each point on the line is a balanced market
condition, or equilibrium. The slope of the line determines the additional return needed to compensate for a
unit change in risk.


Equity market

Related:Stock market


Eurocurrency market

The money market for borrowing and lending currencies that are held in the form of
deposits in banks located outside the countries of the currencies issued as legal tender.


Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.


Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating Expense ratio (OER).


Expiration

The time when the option contract ceases to exist (expires).


Expiration cycle

An expiration cycle relates to the dates on which options on a particular security expire. A
given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or the March cycle. At any
point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2
in far-term months.


Expiration date

The last day (in the case of American-style) or the only day (in the case of European-style)
on which an option may be exercised. For stock options, this date is the Saturday immediately following the
3rd Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of
an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding
Thursday.


External market

Also referred to as the international market, the offshore market, or, more popularly, the
Euromarket, the mechanism for trading securities that (1) at issuance are offered simultaneously to investors
in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: internal
market


Fair market price

Amount at which an asset would change hands between two parties, both having
knowledge of the relevant facts. Also referred to as market price.


Feasible target payout ratios

Payout ratios that are consistent with the availability of excess funds to make
cash dividend payments.


Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.


Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.


Financial leverage ratios

Related: capitalization ratios.


Financial market

An organized institutional structure or mechanism for creating and exchanging financial assets.


Financial ratio

The result of dividing one financial statement item by another. ratios help analysts interpret
financial statements by focussing on specific relationships.


Fisher's separation theorem

The firm's choice of investments is separate from its owner's attitudes towards
investments. Also refered to as portfolio separation theorem.


Fixed asset turnover ratio

The ratio of sales to fixed assets.


Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
(net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid
plus long-term lease payments).


Fixed-income market

The market for trading bonds and preferred stock.


Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.


Foreign bond market

That portion of the domestic bond market that represents issues floated by foreign
companies to governments.


Foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies.


Foreign market

Part of a nation's internal market, representing the mechanisms for issuing and trading
securities of entities domiciled outside that nation. Compare external market and domestic market.


Foreign market beta

A measure of foreign market risk that is derived from the capital asset pricing model.


Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for exporting U.S.-produced goods.


Forward market

A market in which participants agree to trade some commodity, security, or foreign
exchange at a fixed price for future delivery.


Fourth market

Direct trading in exchange-listed securities between investors without the use of a broker.


Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.


Funding ratio

The ratio of a pension plan's assets to its liabilities.


Funds From Operations (FFO)

Used by real estate and other investment trusts to define the cash flow from
trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly
used is Funds Available for Distribution (FAD), which is FFO less capital investments in trust property and
the amortization of mortgages.


Futures market

A market in which contracts for future delivery of a commodity or a security are bought or sold.


Gray market

Purchases and sales of eurobonds that occur before the issue price is finally set.



 

 

 

 

 

 

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