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Kurt
It would help study the financial statements of Citi to understand the break up of the capital employed, which usually consist of:
Ordinary Shareholders equity
Preferred stock
Long term loans
Preferred stock is classified as a long term loan and grouped with other term loans, it measures the gearing of a company. A highly geared company is one which has a larger portion of fixed charge capital compared to ordinary shareholders’ equity.
Conversion option is available when the terms of issue of preferred stock contain a term which allow them to convert a certain portion of preferred stock into ordinary shares.
Please study the conversion rate and the effect of the gearing after conversion to understand the impact.
I think tangible equity refers to ordinary shares. Referring to the statement it means that out of the total assets of $2trillion, Citi will have ordinary equity of $80B and the balance of $120B will represent debt.