Definition
Tangible book value strips out intangible assets (patents, trademarks) and goodwill (overpayment on acquisitions) from standard book value. It represents the floor value of a company based on physical assets that can be sold. P/TBV is particularly useful for analyzing banks and financial institutions.
functions Formula
TBV = Book Value − Goodwill − Intangible Assets
lightbulb Example
Book value is $50M, goodwill is $15M, and intangibles are $5M. TBV = $30M. With 10M shares outstanding, TBV per share is $3.00.
verified_user Key Points
- More conservative than standard book value
- Essential for bank valuations
- Companies with large acquisitions may have significant goodwill
- TBV can be negative if goodwill exceeds equity