Kapie

AndrewUNH Wrote:
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> and what types of firms would P/B be INAPPROPRIATE
> for?


Anything w/ a lot of intangible value or service oriented businesses (human capital). You would never do a P/B ratio on Google, because all their value is in the IP of their software for the search engine, etc. You would never do a P/B ratio on a firm like WPP (largest advertising firm in the world), law firms, or a recruiter/consulting firm like Heidrick Struggles (largest headhunter/recruiter globally). Both businesses rely entirely on the margins you are making (what you bill per hour vs. what you pay your employees per hour). The P/B of your assets is meaningless.

P/B can be inappropriate for some other firms depending on the circumstances. You basically have to know the business in the first place, though.