How to calculate Q Ratio ?

The Q ratio measures the market value of a company compared to the replacement value of the firm’s assets.
Nobel laureate James Tobin came up with the Q ratio. He based it on his theory that the combined market value of every company on a stock market should roughly equal their replacement costs. In other words, the value of a United States firm should be equal to what it would cost to start that same firm today.
A Q ratio is calculated by dividing the total market value of firms by their total asset value.
For example, say the firms on a stock market have a total value of $100 billion, and the cost to replace them is $100 billion. The Q ratio is 1.
A Q ratio above 1 means the market is overvalued and stocks might not be the best investment. A Q ratio below 1 means the market is undervalued.
When applied to an individual company, a Q ratio above 1 means it’s overvalued. Its stock is more expensive than the costs of its assets. When the total market value is below the cost of its assets, a firm’s Q ratio is less than 1. That means its stock is undervalued.
Historically, Q ratios have provided investors with valuable information to guide their decisions.

[郑天-rr]

Mesej yang jelas, struktur yang jelas, mudah difahami, terima kasih

[Lucas-cxdc]

Do I need to count preferred stocks or just ordinary stocks?

[Piggy]

Just WOW! This concept makes absolutely no sense.