Tobin's q

Tobin's Q ( German: Tobin's quotient ) is a ratio for business valuation. The quotient is named after James Tobin, Nobel Laureate in Economics in 1981, which advocated this measure from 1968. A common German synonym is the market -to-book value ratio, although it is in fact a market value - intrinsic value ratio or price - net asset value ratio. A value less than 1 indicates an undervaluation, a value greater than 1 to an overvaluation.

The Tobin's Q is calculated by dividing the market value of a company (stock capitalization plus liabilities) by the replacement cost of all assets (not to be confused with tax or legal book values ​​).

If this ratio is greater than 1, this means that the company is traded on the stock exchange at a higher value than the sum of its assets is. This added value can be achieved, that a company generates more income than could be expected on the basis of the assets. Another reason for an above-average market value is positive expectations on future performance, which drive the market price of a company in the height.

A Q is less than 1 would mean, however, that the assets larger replacement cost than the entire company. The company will therefore acted "under value ", making it a candidate for a takeover, possibly a leveraged buyout, makes, as the company as a whole costs less than its parts. Tobin's Q can therefore serve also for investors as a (static ) ratio for business valuation.

According to Tobin, a company should a Q in the region of 1 have, so the market value of the company approximately reflects the cost that would require it to replicate exactly the company; for all enterprises should always be 1 Q (according to Tobin ).