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    Question

    In risk management, the Capital Adequacy Ratio (CAR) is

    an essential measure used to ensure a bank’s financial stability. It is expressed as a percentage of:
    A Total capital to total risk-weighted assets Correct Answer Incorrect Answer
    B Net interest income to operating expenses Correct Answer Incorrect Answer
    C Total liabilities to total assets Correct Answer Incorrect Answer
    D Loan portfolio to net worth Correct Answer Incorrect Answer
    E Gross non-performing assets to total advances Correct Answer Incorrect Answer

    Solution

    CAR ensures that a bank has enough capital to absorb potential losses from its risk-weighted assets, thereby maintaining solvency and depositor trust.

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