Consider the following statements:1. Price to book value (P/BV) ratio concept is widely used in detecting the Non-Performing Assets of the Banks.2. It is a relationship between the market capitalisation of an organisation and the value of assets it possesses.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?

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Consider the following statements:

1. Price to book value (P/BV) ratio concept is widely used in detecting the Non-Performing Assets of the Banks.
2. It is a relationship between the market capitalisation of an organisation and the value of assets it possesses.

Which of the statements given above is/are correct?

a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2

Correct answer is option 'C'. Can you explain this answer?

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Consider the following statements:1. Price to book value (P/BV) ratio ...

Option C is correct: The price to book value (P/BV) ratio is a valuation parameter used for valuing stocks. In essence, the P/B ratio draws a relationship between the market capitalisation of an organisation and the value of assets it possesses. P/BV is arrived at by dividing the market price of a share with the respective company's book value per share. Book value (BV) is equal to the shareholder's equity (share capital plus reserves and surplus). BV can also be derived by subtracting current and non-current liabilities from total assets. For the banking and finance companies, book value is calculated as 'share capital plus reserves minus miscellaneous assets not written off. This formula then takes care of the bank's NPAs (non performing assets) and gives a correct picture.

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Consider the following statements:1. Price to book value (P/BV) ratio concept is widely used in detecting the Non-Performing Assets of the Banks.2. It is a relationship between the market capitalisation of an organisation and the value of assets it possesses.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?

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