Tangible Common Equity (TCE)

Tangible common equity (TCE) represents a company's tangible assets minus its liabilities and intangible assets, such as goodwill and patents. TCE provides a more conservative measure of a company's financial health by focusing on physical assets and excluding intangibles, which may be harder to value or liquidate in the event of financial distress. Investors use TCE to assess a company’s ability to absorb losses and its financial strength.

Example

A bank calculates its tangible common equity by subtracting its liabilities and intangible assets from its total assets, providing a clearer picture of its financial stability.