Tangible Capital Definition & Meaning | Financial Term | CSIMarket
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Glossary

Tangible Capital

Financial Term

Tangible capital refers to the physical assets owned by a company that are used to generate revenue. These assets include land, buildings, equipment, machinery, and inventory. Tangible capital is an important asset for companies, especially those in manufacturing or extractive industries. It can also be used as collateral for loans.

In the financial industry, tangible capital is often used in calculations of a company*s financial health. For example, the debt-to-tangible capital ratio measures a company*s debt in relation to its tangible assets. This ratio can give investors and creditors an idea of a company*s ability to repay its debts and whether it has enough tangible assets to back up its obligations.

Tangible capital is also used in the calculation of various financial metrics, such as return on tangible equity (ROTE). ROTE measures a company*s profitability in relation to its tangible capital. It is calculated by dividing net income by tangible equity.

Overall, tangible capital is an important component of a company*s financial health and is used by investors, creditors, and financial analysts to evaluate the company*s financial performance and potential risks.


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