 In this module, we are going to discuss a technical concept which is called price to book or the PBE ratio. So, as we have already discussed that the book value and the market value both play an important role in explaining the overall financial position of a company. There is this technical way of determining that the market value is doing good as compared to the book value or the book value is better than the market value for a certain company. And this particular value will help us in deciding whether or not we need to invest in a certain company. So, when we look at this price to book ratio, there is this very simple formula which is used to calculate the price to book ratio. When we say price to book ratio, we are putting the market price of a share in the numerator and the book value per share in the denominator. So, market price will be placed and it will be divided by the book value per share. So, the number which you will get is the price to book ratio. If the market value of a share is exactly equal to the book value of that share, then the ratio will become 1. And if the ratio is 1, then it is very easy to understand what it implies. It means that there is no difference between the book value and the market value of a share and the two values are at par. They are equal to each other. This means that the company behaves in the stock market and the company behaves in the terms of financial statements. There is no significant difference in that. But if you have calculated the ratio, the price to book ratio and your value is 1 to small, this means that the value of the denominator which is the book value of a share is large as compared to the market value of a share. So, you will get a ratio of 1 to small. When 1 to small means that the share is undervalued, means the share in the financial market or the stock market is less as compared to the share in the financial statements. This means that the sentiment of the investor or the investor's optimism is not visible for this particular company. Despite having a strong position when we look at the financial statements that your share is undervalued. On the contrary, there is a possibility that the market share of the company is higher in value as compared to the book value. In this case, the price to book ratio's value will be greater than 1 because the numerator's value is large as compared to the denominator. So, we will say that in this case, your share is overvalued. This means that the investor is giving more value to this particular company's share as compared to its financial statements. So, now this is a tricky situation. You must be thinking that the value of 1 to bigger is better or the value of 1 to smaller is equal to 1. So, basically, it is important to understand that the stock market changes according to the seconds. So, I told you that the stock market is a very volatile market. Volatile means that there are very fast changes in that market. You get to see the changes after every minute. So, at the beginning of the day, you get to see any share overvalued. But in the evening, you get to see it undervalued. So, only undervalued or overvalued, you should not take it towards ultimate decision-making. So, we have to keep in mind all the things that the overall financial position is. So, it is not just the PV value, which is, for example, if it is larger than 1 or it is smaller than 1 and on the basis of which you can decide that we need to invest in this share or not. Both the book value and the market value, they are offering two different insights into the company's valuation or the performance in terms of its financial performance. So, it is important to consider both of them. And again, if you are getting to see the overvalued or undervalued, then you have to look at a longer spectrum that throughout this particular time period, in a certain prime period, its value is going up or down, the market value. According to that, if you decide on any investor, they need to compare the two values. And when we are going to look at the company, whether we are going to invest in or not, it is not one thing or just the PV ratio, which is to be considered. The investor will overall look at the overall spectrum or the overall performance of the company in long-term and then decide whether to discount or disregard the performance of the values of the parameters. And then you are going to decide whether or not to invest in it or not.