Wrong! P/BV, price to book value ratio, is the market price per share divided by the book value of that share.

Right! P/BV is based on the balance sheet of a company and is the difference between its assets (what it owns) and liabilities (what it owes).

Significance: Traditionally stocks with a P/BV significantly less than 1 are considered good buys. The argument is that balance sheets are sometimes a better measure of a company's value than market prices which are often volatile and guided by sentiment. Therefore firms which trade below their book value will sometimes be good firms which are being undervalued by fickle markets.

P/BV = (Equity + Profits - Losses) - Dividend.