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📝 What is PB Ratio? (Price to Book Ratio)

📚 What is PB Ratio? (Price to Book Ratio) Imagine you want to buy an old cycle 🚲 from your friend. He says: "The cycle cost me ₹5,000 originally, but I’ll sell it to you for ₹10,000." You’d think: 👉 “Hey! Why pay ₹10,000 when the real value is ₹5,000?” 🤨 This comparison of “Price vs Value” is exactly what PB Ratio tells you for stocks! 🎯 What is PB Ratio? PB Ratio = Price of 1 Share ÷ Book Value Per Share ✔️ Price = Market price of 1 share (what the stock costs today) ✔️ Book Value = Company’s net worth per share (real value of its assets) Simple example: ✔️ A company’s Book Value per share = ₹50 ✔️ Share price = ₹100 👉 PB Ratio = ₹100 ÷ ₹50 = 2 ➡️ You are paying ₹2 for every ₹1 of the company’s net worth. 🤔 What is Book Value? Book value = Total Assets – Total Liabilities 👉 If company closes down today, sells everything, pays off all loans — Whatever is left is the Book Value (the company’s real worth on paper)! 🏢📒 🎨 Funny Example: Bunty owns a bakery 🥐: ✔️ His shop, oven, mixer are worth ₹1,00,000. ✔️ He owes the bank ₹20,000. So, Bunty’s Bakery Net Worth = ₹1,00,000 – ₹20,000 = ₹80,000. He has issued 1,000 shares. 👉 Book Value per share = ₹80,000 ÷ 1,000 = ₹80 But his shop shares are selling at ₹160 per share in the market! 👉 PB Ratio = ₹160 ÷ ₹80 = 2 Means: You are paying ₹2 for every ₹1 of Bunty's bakery value! 🍞💰 🎯 How to Interpret PB Ratio? ✔️ PB Ratio < 1: Stock price is cheaper than the company’s real value! 🔥 Bargain alert! But wait... maybe company is in trouble? 👀 ✔️ PB Ratio = 1: You are paying exactly for what the company is worth! 💵👌 ✔️ PB Ratio > 1: Stock price is costlier than the company’s book value. Maybe investors expect future growth? 📈 🚨 When Low PB Ratio is Good? ✅ Company is profitable ✅ Business model is strong ✅ Market simply ignoring the stock 👉 Possible hidden gem for smart investors! 💎 ⚠️ When Low PB Ratio is Bad? ❌ Business is dying ❌ Company is in big debt ❌ No growth, no future hope 👉 Could be a “Value Trap” — looks cheap but dangerous! ⚠️ 💥 When High PB Ratio is Okay? ✔️ High growth company 🚀 ✔️ Strong brand value 👑 ✔️ Big future potential 🔮 👉 Investors willing to pay extra because of future promise! 🔍 Smart Tips to Use PB Ratio: ✔️ Always compare PB with similar companies (same industry!) 🏭 ✔️ Low PB = Investigate! Could be a golden chance or a hidden problem. ✔️ High PB = Check future growth. Worth paying high or just market hype? 🧨 Danger Signs: ⚠️ PB suddenly falls = Investors lost trust 😨 ⚠️ PB too high without profits = Stock may be overpriced like ₹500 chai ☕😂 🎯 Final Simple Formula: PB Ratio = Market Price ÷ Book Value per Share ✔️ Low PB + Good Business = Possible Winner! 🏆 ✔️ High PB + Fast Growing = Possible Future Star! 🌟 ✔️ Low PB + Bad Business = Possible Disaster! 💥 🎈 Funny Tip: PB Ratio looks cheap? First check — maybe this stock is cheap because no one wants it, like last year's fashion! 👗😂 📝 In a Nutshell: ✔️ PB Ratio = "How much are you paying compared to the company's actual worth?" ✔️ Low PB = Cheap-looking, but check the company health first! ✔️ High PB = Expensive, but maybe the future is super bright! 💡 “PB Ratio is like buying a house — you don’t just see the price, you also see how much it’s actually worth!” 🏠💰