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I guess this is talking about price-to-book? In some other countries, price-to-book is usually close to 1, or even below it, which always struck me as strange. Either something is wrong with their stock markets, or companies are not as profitable as they might be for some reason. (Maybe a good reason; profits aren't everything in life). I'm not familiar with the Q ratio so maybe it's a slightly different concept... It makes sense for a single company, if it is so unprofitable, even including future potential profitability, that it really should be shut down and stripped for assets. But ordinarily I would expect a company to be worth significantly more than its book value. Otherwise, you could easily recreate the company by just "replacing" the assets. But this is only true if the company is based entirely on easily replaceable, low skill labor. Are there any large companies like this anymore? In reality, there are intangible assets - and I'm not talking about software etc. - that are very difficult to measure, and guarantee that any worthwhile business should be valued at more than its tangible assets. Some things are hard to price, but might be possible to sell off: brand identity, customer base, marketing data, etc. Still, replacing these things is hard. Some things are very hard to sell off. Businesses have employees, and employees are in an organizational structure where they know how to work with other employees to get their jobs done. As well, there are relationships with contractors and vendors. Replacing these is extremely hard. |