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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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