The market-to-book value ratio and the Tobin's Q ratio are both indicators of a successful firm when:
A) their values are both greater than 0.
B) their values are both no less than 10.
C) their values are both less than 0.
D) their values are both less than 1.
E) their values are both greater than 1.

Question

Quizplus · Accepted Answer

The market-to-book value ratio and the Tobin's Q ratio are indicators of a firm being valued more highly by the market than its book value, suggesting the market sees the firm as successful or having strong growth prospects. Both ratios being greater than 1 indicates that the market value exceeds the book value or replacement cost, respectively, which is generally seen as a positive sign.

The Market-To-Book Value Ratio and the Tobin's Q Ratio Are