Tangible Book Value equals book value minus intangible assets and goodwill
Tangible Book Value (alternately "Net Tangible Assets" or "Net Tangible Equity") is the total net asset value of a company (book value) minus intangible assets and goodwill.
A company's standard book value may be significantly affected by intangible assets and/or goodwill. As the values of these assets are more subjective than "hard" assets (such as cash or property, plant and equipment), including them in the calculation of book value may misrepresent the underlying worth of the company. Thus, In general, tangible book value can be thought of as the worth of all of the company's physical "stuff" and is therefore a close approximation to what the company might expect to see returned in a liquidation.
Example
- On its balance sheet, company XYZ lists assets of $450 million, of which $125 million is attributed to intangible assets and $25 million to goodwill. XYZ also lists total liabilities of $200 million. The book value, therefore, is $250 million (450 – 200) while the tangible book value is $100 million (450 – 125 – 25 – 200).
See Also
