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    Question

    What does the Capital Adequacy Ratio (CAR), also known as the Capital-to-Risk Weighted Assets Ratio (CRAR), indicate about a bank?

    A The bank's profitability in a fiscal year Correct Answer Incorrect Answer
    B The efficiency of the bank's customer service Correct Answer Incorrect Answer
    C The liquidity of the bank's assets Correct Answer Incorrect Answer
    D The ability to meet its obligations relative to risk-weighted assets Correct Answer Incorrect Answer
    E The total assets held by the bank Correct Answer Incorrect Answer

    Solution

    The capital adequacy ratio (CAR) is an indicator of how well a bank can meet its obligations. Also known as the capital-to-risk weighted assets ratio (CRAR), the ratio compares capital to risk-weighted assets and is watched by regulators to determine a bank's risk of failure.

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