Tangible common equity

Tangible common equity (TCE), the subset of shareholders' equity that is not preferred equity and not intangible assets,[1][2] is an uncommonly used measure of a company's financial strength. It indicates how much ownership equity owners of common stock would receive in the event of a company's liquidation. During the financial and economic crisis of 2008–2009, it gained public popularity as a measure of the viability of large commercial banks. When used in a ratio with tangible common assets, it measures a bank's ability to absorb losses (e.g., homeowners defaulting on mortgages) before becoming insolvent. It is one of the factors considered by the Office of the Comptroller of the Currency to determine if a bank has become insolvent.

## Contents

* 1 Formula
* 2 Example
* 3 See also
* 4 References

## Formula

* TCE = total equity – intangible assets – goodwill – preferred stock[citation needed]
* tangible assets = total assets - intangible assets - goodwill - preferred stock
* TCE ratio = TCE / (tangible assets)[citation needed]
* Leverage ratio = (total assets – intangible assets – goodwill) / TCE[citation needed]

## Example

On February 27, 2009, the U.S. Government converted preferred shares to common shares to increase Citigroup's tangible common equity.[3] In this example, the company's total equity remained the same, but its preferred equity decreased, thereby increasing common equity (and TCE).

## See also

* Bank stress tests
* Return on tangible equity
* Intrinsic value (finance) § Equity

## References

1. ↑ "Tangled Tangibles", by Tracy Alloway an FT Alphaville November 23, 2008 blog entry
2. ↑ "Tangible Common Equity for Beginners" from baselinescenario.com
3. ↑ "Citi to Exchange Preferred Securities for Common, Increasing Tangible Common Equity to as Much as $81 Billion", Wall Street Journal, February 27, 2009

* v
* t
* e

Financial markets

Types of markets|

* Primary market
* Secondary market
* Third market
* Fourth market

Types of stocks|

* Common stock
* Golden share
* Preferred stock
* Restricted stock
* Tracking stock

Share capital|

* Authorised capital
* Issued shares
* Shares outstanding
* Treasury stock

Participants|

* Broker-dealer
* Day trader
* Floor broker
* Floor trader
* Investor
* Market maker
* Proprietary trader
* Quantitative analyst
* Financial law
* Regulator
* Stock trader

Exchanges|

* Electronic communication network
* List of stock exchanges
* Trading hours
* Multilateral trading facility
* Over-the-counter

Stock valuation|

* Alpha
* Arbitrage pricing theory
* Beta
* Bid–ask spread
* Book value
* Capital asset pricing model
* Capital market line
* Dividend discount model
* Dividend yield
* Earnings per share
* Earnings yield
* Net asset value
* Security characteristic line
* Security market line
* T-model

Trading theories
and strategies|

* Algorithmic trading
* Buy and hold
* Contrarian investing
* Day trading
* Dollar cost averaging
* Efficient-market hypothesis
* Fundamental analysis
* Growth stock
* Market timing
* Modern portfolio theory
* Momentum investing
* Mosaic theory
* Pairs trade
* Post-modern portfolio theory
* Random walk hypothesis
* Sector rotation
* Style investing
* Swing trading
* Technical analysis
* Trend following
* Value averaging
* Value investing

Related terms|

* Block trade
* Cross listing
* Dark pool
* Dividend
* Dual-listed company
* DuPont analysis
* Efficient frontier
* Flight-to-quality
* Government bond
* Haircut
* Initial public offering
* Long
* Margin
* Market anomaly
* Market capitalization
* Market depth
* Market manipulation
* Market trend
* Mean reversion
* Momentum
* Open outcry
* Position
* Public float
* Public offering
* Rally
* Returns-based style analysis
* Reverse stock split
* Share repurchase
* Short selling
* Slippage
* Speculation
* Stock dilution
* Stock exchange
* Stock market index
* Stock split
* Trade
* Uptick rule
* Volatility
* Voting interest
* Yield

0.00

(0 votes)

Original source: https://en.wikipedia.org/wiki/Tangible common equity. Read more

|

Retrieved from "https://handwiki.org/wiki/index.php?title=Finance:Tangible_common_equity&oldid=358590"
*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template