Tangible book value
Book value with goodwill and intangibles stripped out.
Because goodwill is simply the premium paid in past acquisitions, and it can be written off overnight, conservative investors remove it. What is left is the hard, physical, saleable substance of the business.
When tangible book value is negative, the company's real assets do not cover its liabilities, and the equity value rests entirely on future earnings rather than on anything you could sell.
Tangible book = Book value − Goodwill − Intangible assetsHow the three statements lock together
Profit flows from the income statement into the balance sheet as retained earnings, and the cash flow statement reconciles what was earned with what actually arrived.
It is the stress-tested version of book value, and the one that survives an impairment.
Ignoring a large goodwill balance until the day it is written off and the equity halves.
Related terms
See Tangible book value on a real company
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