What is the 'Tangible Common Equity Ratio - TCE'

The tangible common equity ratio (TCE) is a ratio used to determine how much losses a bank can take before shareholder equity is wiped out. The Tangible Common Equity (TCE) ratio is calculated by taking the value of the company's total equity and subtracting intangible assets, goodwill and preferred stock equity and then dividing by the value of the company's tangible assets. Tangible assets is the company's total assets less goodwill and intangibles.

BREAKING DOWN 'Tangible Common Equity Ratio - TCE'

This ratio became popular when evaluating banks during the credit crisis in 2008. Its conservative approach has made it a very risk free way for investors to evaluate worst case scenarios of their investments.

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RELATED FAQS
  1. What is the difference between shareholder equity and net tangible assets?

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  2. How are net tangible assets calculated?

    Learn about net tangible assets, what it measures and how to calculate a company net tangible assets using examples. Read Answer >>
  3. What is the difference between goodwill and tangible assets?

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  4. Why is the amount of net tangible assets an important benchmark?

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  5. What is the difference between tangible and intangible assets?

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