How is the price-to-book (P/B) ratio calculated?

The price-to-book (P/B) ratio is a financial metric used to compare a company's market value to its book value. It is calculated by taking the market price per share of the company's stock and dividing it by the book value per share.

This ratio provides insight into how the market values a company's equity relative to its actual net asset value as recorded on the balance sheet. A higher P/B ratio may indicate that the market perceives the company to have strong growth potential or that it is overvalued, while a lower P/B ratio could suggest that the company is undervalued or facing challenges.

The other options involve different mathematical operations that do not accurately represent the relationship defined by the P/B ratio. Option B inversely portrays the relationship, option C adds the market price and book value instead of comparing them, and option D subtracts book value from market price rather than forming a ratio. Hence, the correct approach is to use market price per share divided by book value per share to arrive at the P/B ratio.