When Considering the Determinants of the Price-To-Book Ratio (PB) Which

question 14

Multiple Choice

When considering the determinants of the price-to-book ratio (PB) which of the following is correct?

I. All other things being equal, the greater a company's return on common stockholders' equity, the greater the PB ratio.
II. All other things being equal, the greater a company's cost of equity, the greater the PB ratio.
III. If a company's return on common stockholders' equity equals its cost of equity, the PB ratio should equal 1.
IV. The greater a company's current earnings the higher the PB ratio.

• A)I, III, and IV
• B)I and III
• C)II and IV
• D)I and II

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