The Capital Adequacy Ratio set standards for banks by looking at a bank's ability to pay liabilities, and respond to credit risks and operational risks.
- Debenture: $9,000 * 90% = $8,100.
- Mortgage: $45,000 * 75% = $33,750.
- Loan to Government: $4,000 * 0% = $0.
How is capital adequacy ratio calculated?
The capital adequacy ratio is calculated by dividing a bank's capital by its risk-weighted assets.
What is capital ratio formula?
Working capital ratio formula The working capital ratio shows the ratio of assets to liabilities, i.e. how many times a company can pay off its current liabilities with its current assets. The working capital ratio calculation is: Working capital ratio = current assets / current liabilities.
How do you calculate capital adequacy ratio in Excel?
Definition: Capital Adequacy Ratio (CAR) is the ratio of a bank's capital in relation to its risk weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.