Current location - Training Enrollment Network - Mathematics courses - Calculation of P/E ratio, P/B ratio and ROE
Calculation of P/E ratio, P/B ratio and ROE
The calculation formula of ROE is: ROE = net profit/average net assets.

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".