Tobin’s q

Updated: Aug 20, 2021

The ratio of the valuation shareholders put on a firm to the market value of its assets. At the margin the shareholders’ valuation is shown by the share price multiplied by the number of shares.The theory is that if q > 1 a firm should invest; if q < 1 the firm should run down or sell off its capital equipment.

Reference: Oxford Press Dictonary of Economics, 5th edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.