Balance Sheets ; Cash Flow Statements ; Income Statements ; Return on Assets Financial ratios are relationships determined from a company's financial information and used for comparison purposes. Examples include such often referred to measures as return on investment ROIreturn on assets ROAand debt-to-equity, to name just three. These ratios are the result of dividing one account balance or financial measurement with another.
Two types of capital are measured: Use[ edit ] Capital adequacy ratio is the ratio which determines the bank's capacity to meet the time liabilities and other risks such as credit risk, operational risk etc.
In the most simple formulation, a bank's capital is the "cushion" for potential losses, and protects the bank's depositors and other lenders. Banking regulators in most countries define and monitor CAR to protect depositors, thereby maintaining confidence in the banking system.
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk. Risk weighting[ edit ] Since different types of assets have different risk profilesCAR primarily adjusts for assets that are less risky by allowing banks to "discount" lower-risk assets.
The specifics of CAR calculation vary from country to country, but general approaches tend to be similar for countries that apply the Basel Accords.
Risk weighting example[ edit ] Risk weighted assets - Fund Based: Risk weighted assets mean fund based assets such as cash, loans, investments and other assets. Degrees of credit risk expressed as percentage weights have been assigned by the national regulator to each such assets.
Non-funded Off-Balance sheet Items: The credit risk exposure attached to off-balance sheet items has to be first calculated by multiplying the face amount of each of the off-balance sheet items by the Credit Conversion Factor.
This will then have to be again multiplied by the relevant weightage. Bank "A" has assets totaling units, consisting of:Capital requirements govern the ratio of equity to debt, recorded on the liabilities and equity side of a firm's balance sheet. They should not be confused with reserve requirements, Basel II requires that the total capital ratio must be no lower than 8%.
What is Balance Sheet? The balance sheet is one of the most important financial statements and is useful for doing accounting analysis and modeling..
Balance Sheet Definition. Balance Sheet is the “Snapshot” of a company’s financial position at a given moment. The debt ratio is calculated by dividing total liabilities by total assets.
Both of these numbers can easily be found the balance sheet. Here is the calculation. In accounting, a balance sheet is a type of financial statement that provides a synopsis of a business entity's financial position at a specific time, including a company's economic resources (assets), economic obligations (liabilities), and the value of a company after its .
Learn balance sheet formulas and ratios you need to know, including working capital, receivable and inventory turnover, and the quick ratio.
Ratios are calculated by dividing one number by another, total sales divided by number of employees, for example. Ratios enable business owners to examine the relationships between items and.