In the upcoming issue of Fortune, Warren Buffett criticizes the Treasury's (and some investors') recent emphasis on banks' tangible common equity [TCE] to assets ratio as a criterion for judging their financial stability. He does so in response to interviewer Adam Lashinsky's question about Wells Fargo's TCE (Buffett's Berkshire Hathaway has invested in Wells Fargo's common stock).
Mr. Buffett states that tangible common equity is not usually an important factor in evaluating a company's ability to prosper, and he cites Coca-Cola (a long-term holding of Berkshire Hathaway) as one company that is highly successful, despite having no tangible common equity. However, Coca-Cola's year-end balance sheet does, in fact, show positive tangible common equity of over $8 billion ($20.862 Shareholders' Equity, minus $4.029 billion Goodwill, minus $6.059 billion trademarks, minus $2.417 billion Other Intangible Assets .....equals a total of $8.367 billion Tangible Assets, all of which is Tangible Common Equity).
Mr. Buffet makes some very good points in this article, but citing Coca-Cola as an example of financial stability in the absence of substantial tangible common equity is not one of them.
Disclosure: I hold shares of Berkshire Hathaway (NYSE:BRK.B) in a family account which I manage. I manage no holdings of Coca-Cola.