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QuestionsCategory: Valuation QuadrantCalculating P/B Ratio
Tash asked 4 years ago

Hi Victor / Rusmin,
May I know what is the underlying concept for considering which assets to include when calculating the Price/Book ratio? Understand that you mentioned in the recent workshop to include cash, inventory, receivables, financial assets, intangible assets, investment properties and PPE. Hence, I was wondering if these are the common assets to include, and those not mentioned should be excluded, or if they were just examples?
I’m asking this as I was going through a company’s FS, and was unsure as to whether to include investment in associate companies. It will be great if you could explain how do we determine generally what is the book value (ie. which assets and liabilities to include) of the company.
Thank you!

1 Answers
Victor Chng answered 4 years ago

Hi Tash,
What i meant is that if the company have lots of cash, property, investment assets or even investment properties in their balance sheet. Hence, it is ideal to use PB ratio valuation on them.