Tangible Common Equity - TCE

What is 'Tangible Common Equity - TCE'

Tangible common equity (TCE) is 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.

BREAKING DOWN '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. Tangible Common Equity Ratio - ...

    A ratio used to determine how much losses a bank can take before ...
  2. Tangible Book Value Per Share - ...

    A method of valuing a company on a per-share basis by measuring ...
  3. Price to Tangible Book Value - ...

    A valuation ratio expressing the price of a security compared ...
  4. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  5. Preferred Stock ETF

    An exchange-traded fund that either tracks a preferred stock ...
  6. Return on Market Value of Equity ...

    Return on market value of equity (ROME) is a comparative measure ...
Related Articles
  1. 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.
  2. Economics

    Explaining Tangible Net Worth

    Tangible net worth is determined by taking total assets, then subtracting liabilities and intangible assets.
  3. Savings

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  4. Entrepreneurship

    How to Calculate Your Tangible Net Worth

    Your net worth can be calculated with a simple equation.
  5. Term

    Comparing Tangible and Intangible Assets

    Tangible assets are physical assets such as land, vehicles or equipment.
  6. Markets

    Investment Valuation Ratios: Price/Book Value Ratio

    By Richard Loth (Contact | Biography)A valuation ratio used by investors which compares a stock's per-share price (market value) to its book value (shareholders' equity). The price-to-book value ...
  7. Investing Basics

    Stocks Basics: Different Types Of Stocks

    There are two main types of stocks: common stock and preferred stock. Common Stock Common stock is, well, common. When people talk about stocks they are usually referring to this type. In fact, ...
  8. Fundamental Analysis

    Valuation Of A Preferred Stock

    Determining the value of a preferred stock is important for your portfolio. Learn how it's done.
  9. Investing Basics

    Explaining Market Value of Equity

    Market value of equity is the total value of all the outstanding stock as measured in the stock market at a particular time.
  10. Term

    How Equity Capital Markets Work

    An equity capital market is a market existing between companies and financial institutions that raises money for the companies.
RELATED FAQS
  1. 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 >>
  2. Why is the amount of net tangible assets an important benchmark?

    Find out more about net tangible assets, how to calculate net tangible assets and the importance of net tangible assets and ... Read Answer >>
  3. Why should you invest in tangible assets?

    Read about some of the possible benefits of investing in tangible assets, such as bullion, real estate, art, collectibles ... Read Answer >>
  4. What is the difference between the equity market and the stock market?

    Discover the basic information about the equity, or stock, market and the two primary classifications of equities that are ... Read Answer >>
  5. What are some examples of preferred stock, and why do companies issue it?

    Understand the difference between preferred stock and common stock, and learn the primary reasons why companies issue preferred ... Read Answer >>
  6. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center