Which of the following is a definition of Tobin's q?
A) the growth rate of the quantity of money
B) a firm's optimal capital stock divided by its actual capital stock
C) the ratio of a firm's stock market valuation to the value of its physical assets
D) the ratio: gross investment/net investment
E) the rate at which physical capital depreciates, plus the interest rate

Question

Quizplus · Accepted Answer

Tobin's q is defined as the ratio of a firm's stock market valuation to the replacement cost of its physical assets. It is commonly used as a measure of a firm's investment opportunities and the attractiveness of investment in the firm relative to alternative investments.

Which of the Following Is a Definition of Tobin's Q