Tangible Common Equity Ratio - TCE
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Definition of 'Tangible Common Equity Ratio - TCE'
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.
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Investopedia explains '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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Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
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The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
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Carefully examine goodwill and its sources before considering the value of your investment.
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