Condition market to book value ratios be misleading, Financial Management

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Under what circumstances would market to book value ratios be misleading?  Explain.

The Market to Book ratio is helpful, but it is just only a rough approximation of how liquidation and going concern values compare. This is as the Market to Book ratio employs accounting-based book values.  The actual liquidation value of a firm is similar to be different as compared to the book value.  For example, the assets of a firm may be worth more or less as compared to the value at that they are currently carried on the company's balance sheet.  Additionally, the current market price of the company's bonds and preferred stock may as well differ from the accounting value of these claims.


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