Tangible Common Equity - TCE

AAA

DEFINITION of 'Tangible Common Equity - TCE'

A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. Tangible common equity (TCE) is calculated by subtracting intangible assets, goodwill and preferred equity from the company's book value. Measuring a company's TCE is particularly useful for evaluating companies that have large amounts of preferred stock, such as U.S. banks that received federal bailout money in the 2008 financial crisis. In exchange for bailout funds, those banks issued large numbers of shares of preferred stock to the federal government. A company can boost TCE by converting preferred shares to common shares.

INVESTOPEDIA EXPLAINS 'Tangible Common Equity - TCE'

Using tangible common equity to calculate a capital adequacy ratio is one way of evaluating a bank's solvency and is considered a conservative measure of a company's value. Another way to evaluate a bank's solvency is to look at its tier 1 capital, which consists of common shares, preferred shares, retained earnings and deferred tax assets.


RELATED TERMS
  1. Goodwill

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

    A class of ownership in a corporation that has a higher claim ...
  3. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  4. Retained Earnings

    The percentage of net earnings not paid out as dividends, but ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
Related Articles
  1. Economics

    Target Prices: The Key To Sound Investing

    Learn how to evaluate the legitimacy of target prices and why investors should trust these over ratings.
  2. Retirement

    Projected Returns: Honing The Craft

    Find out how to forecast long-term returns on the three major asset classes.
  3. Markets

    Relative Valuation Of Stocks Can Be A Trap

    This method of valuing a company can make it look like a bargain when it is not.
  4. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  5. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  6. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  7. Fundamental Analysis

    Work In Progress (WIP)

    Work in progress, also know as WIP, is an asset on the company balance sheet. WIP is the accumulated costs of unfinished goods that are currently in the manufacturing process.
  8. Investing

    Ex Works (EXW)

    Ex Works, or EXW, is an international legal trade term specifying that the seller is responsible to make his goods ready for pick-up at his place of business.
  9. Fundamental Analysis

    Paid-Up Capital

    Paid-Up Capital is listed in the equity section of the balance sheet. It represents the amount of money shareholders have paid into the company by purchasing shares. It’s essentially two accounts, ...
  10. Fundamental Analysis

    Is depreciation only used for tangible assets?

    Learn if tangible assets can be depreciated, as well as what other assets are eligible for depreciation so you can account for them accurately.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center