Tangible Common Equity Ratio - TCE

AAA

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.

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.

RELATED TERMS
  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  3. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  4. Commercial Bank

    A financial institution that provides services, such as accepting ...
  5. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  6. Regional Asset Liquidation Agreement ...

    An agreement between an asset manager and the Federal Deposit ...
RELATED FAQS
  1. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  2. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  3. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  4. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  5. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  6. What are the similarities and differences between the savings and loan (S&L) crisis ...

    The savings and loan crisis and the subprime mortgage crisis both began with banks creating new profit centers following ... Read Full Answer >>
Related Articles
  1. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  2. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  3. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  4. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  5. Economics

    What are Capital Goods?

    Capital goods are assets with a useful life of more than one year that are used for the production of income.
  6. Economics

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  7. Fundamental Analysis

    What is Year-to-Date?

    Year-to-date (YTD) is a term that describes financial results from the beginning of the current year up to the day the financial number is reported.
  8. Investing Basics

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.
  9. Economics

    What is Managerial Accounting?

    Managerial accounting is internally-based accounting that helps managers measure the results of their decisions.
  10. Investing Basics

    Understanding Long-Term Debt

    Long-term debt is any debt or liability that is due in more than one year.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!