Return on tangible equity
Encyclopedia
Return on tangible equity (ROTE) (also return on average tangible common shareholders’ equity) measures the rate of return on the tangible common equity
.
ROTE is computed by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders’ equity. Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock
, goodwill
, and identifiable intangible assets.
Tangible Common Equity
Tangible Common Equity refers to the subset of shareholders' equity that is not preferred equity and not intangible assets.TCE 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...
.
ROTE is computed by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders’ equity. Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
, goodwill
Goodwill (accounting)
Goodwill is an accounting concept meaning the value of an entity over and above the value of its assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps because the reputation the firm...
, and identifiable intangible assets.