The ratio is actually calculated by taking Market Price per Share / Book Value per Share, and thereby compares the value of a market stock with respect to its book value, depicting whether it's undervalued or overvalued.
Methods of Analysis of Financial Statements: Financial analysis involves the following methods which can be applied in order to understand financial statements in-depth:

Horizontal Analysis Horizontal analysis is also referred to as trend analysis, which compares financial data from different periods. Revenue, expense, and profit change over time, so by checking on the changes, analysts would see growth patterns and even warn of future pitfalls.