Among them, the average net assets = (net assets at the beginning of the year+net assets at the end of the year) /2. However, sometimes the average net assets can be replaced by the net assets at the end of the year.
The calculation formula of P/B ratio is: P/B ratio = price per share/net assets per share.
If "net assets per share" is calculated by average net assets, the relationship among return on net assets, P/E ratio and P/B ratio can be obtained through the following mathematical derivation process:
Return on net assets = net profit/average net assets = net profit per share/average net assets per share = (net profit per share/share price)/(average net assets per share/share price) =( 1/ price-earnings ratio) /( 1/ price-earnings ratio) = price-earnings ratio.
Therefore, in this case, the return on net assets can be expressed as "P/B ratio".