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Pitfalls of using Price to Book Ratio.
By ifihadamilliondollarsblog  •  July 30, 2017
This is something about using price to book to value a stock and and I just feel like writing it down. It is also to share with my personal friends. I have been seeing a lot of people using price to book ratio to value a stock and the problem with such a ratio has many deficiencies.  In accounting, a constant issue is always the difficulty in relevance vs reliability. I will give a few examples here. Relevance vs Reliability Your parent bought a HDB flat for 50k 30 years ago, the current value now is 300k. How much should we record the value of the flat. 50k is the more reliable figure as that was indeed the cost paid and supported by all the transaction documents. 300k is the current valuation report. However, valuation can be determined by the current market sentiment, replacement cost (price to buy a similar ......
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By ifihadamilliondollarsblog
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