as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
system
what could cause a stock to trade below book value?
user
the key to evaluating book value is return on equity (roe). that's net profit divided by book value.  the "value" of book value is measured by the company's roe (the higher the better). if the stock is selling below book value, the company's assets aren't earning enough to satisfy most investors. would you buy a cd that was paying, say two percentage points below the going rate for 100 cents on the dollar? probably not. you might be willing to buy it only by paying 2% less per year, say 98 cents on the dollar for a one year cd. the two cent discount from "book value" is your compensation for a low "interest" rate.
assistant