Tangible Common Equity
A more obscure variation of book value, tangible common equity, has recently come into use by the U.S. Federal Government in the valuation of troubled banks. Tangible common equity is calculated as total book value minus intangible assets, goodwill, and preferred equity, and can thus be considered the most conservative valuation of a company and the best approximation of its value should it be forced to liquidate.
Since tangible common equity subtracts preferred equity from the tangible book value, it does a better job estimating what the value of the company is to holders of specifically common stock compared to standard calculations of book value.
Read more about this topic: Book Value
Famous quotes containing the words tangible, common and/or equity:
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—Ralph Waldo Emerson (1803–1882)
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—Christina Stead (1902–1983)