and $(3)$ Enterprise Value$/$EBITDA ratio. The Price$/$Earnings $($P$/$E$)$ ratio shows how much investors are willing to pay per dollar of current

Price $\frac{?}{?}$ Earnings $(\frac{P}{E})$ ratio $=\frac{\text{P}\text{r}\text{i}\text{c}\text{e}\text{p}\text{e}\text{r}\text{s}\text{h}\text{a}\text{r}\text{e}}{\text{E}\text{a}\text{r}\text{n}\text{i}\text{n}\text{g}\text{s}\text{p}\text{e}\text{r}\text{s}\text{h}\text{a}\text{r}\text{e}}$

P$/$E ratios are

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for firms with strong growth prospects and relatively little risk but

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for slowly growing and risky firms. The Market$/$Book $($M$/$B$)$ ratio is another indication of how investors

regard a firm. Its equation is:

Market $\frac{?}{Bk(\frac{M}{B})}$ ratio $=\frac{\text{M}\text{a}\text{r}\text{k}\text{e}\text{t}\text{p}\text{r}\text{i}\text{c}\text{e}\text{p}\text{e}\text{r}\text{s}\text{h}\text{a}\text{r}\text{e}}{\text{B}\text{o}\text{o}\text{k}\text{v}\text{a}\text{l}\text{u}\text{e}\text{p}\text{e}\text{r}\text{s}\text{h}\text{a}\text{r}\text{e}}$

Companies with

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risk and

growth have high M$/$B ratios. M$/$B ratios typically exceed

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$,$ which means that investors are willing to pay more for stocks than their accounting book

values. Unlike the P$/$E and M$/$B ratios, the EV$/$EBITDA ratio looks at the relative market value of all the company's key financial claims. The EV$/$EBITDA ratio

heavily influenced by the company's debt

and tax situations.