FormulaDen.com

Physics Chemistry Math Chemical Engineering Civil Electrical Electronics Electronics and Instrumentation Materials Science Mechanical Production Engineering Financial Health

Capital Adequacy Ratio Formula

Fx Copy

LaTeX Copy

Capital Adequacy Ratiois a regulatory requirement established by banking authorities to ensure that banks maintain a sufficient level of capital relative to the riskiness of their assets. Check FAQs

CAR = \frac{T1C + T2C}{RWA}

CAR - Capital Adequacy Ratio?T1C - Tier One Capital?T2C - Tier Two Capital?RWA - Risk Weighted Asset?

Capital Adequacy Ratio Example

With values

With units

Only example

Here is how the Capital Adequacy Ratio equation looks like with Values.

Here is how the Capital Adequacy Ratio equation looks like with Units.

Here is how the Capital Adequacy Ratio equation looks like.

8 = \frac{2000 + 1600}{450}

8 = \frac{2000 + 1600}{450}

8 = \frac{2000 + 1600}{450}

Tip: Use pencil ( Pencil

) icon above to edit Input Values and Units.

Calculate

Recalculate

Solution

Copy

Reset

You are here -

Home » Category

Financial » Category

Financial Institutions Management » fx Capital Adequacy Ratio

Capital Adequacy Ratio Solution

Follow our step by step solution on how to calculate Capital Adequacy Ratio?

FIRST Step Consider the formula

CAR = \frac{T1C + T2C}{RWA}

Next Step Substitute values of Variables

∴

CAR = \frac{2000 + 1600}{450}

Next Step Prepare to Evaluate

∴

CAR = \frac{2000 + 1600}{450}

LAST Step Evaluate

∴

CAR = 8

Capital Adequacy Ratio Formula Elements

Variables

Capital Adequacy Ratio

Capital Adequacy Ratiois a regulatory requirement established by banking authorities to ensure that banks maintain a sufficient level of capital relative to the riskiness of their assets.

Symbol: CAR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Capital Adequacy Ratio

Tier One Capital

Tier One Capital represents the highest quality and most reliable form of capital available to absorb losses without the bank being required to cease trading.

Symbol: T1C

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Tier One Capital

Tier Two Capital

Tier Two Capital is a component of a bank's regulatory capital that provides additional loss-absorbing capacity beyond Tier 1 capital.

Symbol: T2C

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Tier Two Capital

Risk Weighted Asset

Risk Weighted Asset represent the total assets of a financial institution adjusted for the risk associated with each asset, reflecting the likelihood of default or loss.

Symbol: RWA

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Risk Weighted Asset

Other formulas in Financial Institutions Management category

Go Net Worth

NW = TA - TL

Go Net Interest Margin

NIM = \frac{NII}{AIEA}

Go Operational Efficiency Ratio

OER = \frac{OPEX + COGS}{NS}

Go Loan Loss Provision Coverage Ratio

LLPCR = \frac{EBT + LLP}{NCO}

How to Evaluate Capital Adequacy Ratio?

Capital Adequacy Ratio evaluator uses Capital Adequacy Ratio = (Tier One Capital+Tier Two Capital)/Risk Weighted Asset to evaluate the Capital Adequacy Ratio, The Capital Adequacy Ratio formula is defined as a key financial metric used to measure a bank's capital adequacy and its ability to absorb potential losses arising from its lending and investment activities. Capital Adequacy Ratio is denoted by CAR symbol.

How to evaluate Capital Adequacy Ratio using this online evaluator? To use this online evaluator for Capital Adequacy Ratio, enter Tier One Capital (T1C), Tier Two Capital (T2C) & Risk Weighted Asset (RWA) and hit the calculate button.

FAQs on Capital Adequacy Ratio

What is the formula to find Capital Adequacy Ratio?

The formula of Capital Adequacy Ratio is expressed as Capital Adequacy Ratio = (Tier One Capital+Tier Two Capital)/Risk Weighted Asset. Here is an example- 7.777778 = (2000+1600)/450.

How to calculate Capital Adequacy Ratio?

With Tier One Capital (T1C), Tier Two Capital (T2C) & Risk Weighted Asset (RWA) we can find Capital Adequacy Ratio using the formula - Capital Adequacy Ratio = (Tier One Capital+Tier Two Capital)/Risk Weighted Asset.

Let Others Know

✖

Facebook

Twitter

Copied!

: Value
: Unit

Capital Adequacy Ratio Formula

Capital Adequacy Ratio Example

Capital Adequacy Ratio Solution

Capital Adequacy Ratio Formula Elements

Other formulas in Financial Institutions Management category

How to Evaluate Capital Adequacy Ratio?

FAQs on Capital Adequacy Ratio

Variable Name