Market-to-Book Ratio for Shareholder Value Method

The Market-to-Book Ratio method for calculating Residual Value is similar to the Price/Earnings Ratio method. It uses a “rule-of-thumb” for determining the equity value of a company and, like the P/E method, must be adjusted by adding back the value of the debt to obtain corporate value.

The Market-to-Book Residual Value (v5190) is calculated as follows:

M/B * Common Equity + Value of Dept - Debt Discount

where:

M/B Ratio

(v5120) User-supplied Market-to-Book Ratio

Common Equity

(v2890) Common Equity

Book Value of Debt

(v3510) Total Debt and Preferred Stock

Debt Discount

(v5150) Debt Discount/(Premium)