DEFINITION of 'RiskAdjusted Capital Ratio'
A measure of a financial institutions that compares total adjusted capital (TAC) to the institutions riskweighted assets. There are many variations of riskadjusted capital ratios, depending on how the analyst defines capital. Riskadjusted capital ratios are used to assess the capital adequacy of a financial institution. Analyzing these ratios can help determine whether a bank has enough capital to withstand a downturn in the economy.
BREAKING DOWN 'RiskAdjusted Capital Ratio'
For instance, Standard and Poor's calculates adjusted common equity by taking common shareholder's equity, and adding minority interestequity and subtracting items such as dividends, revaluation reserves, goodwill, tax loss carry forwards, interestonly strips and other adjustments. Then, preferred stock and general reserves are added to this adjusted common equity to get their total adjusted capital.

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Investing
Calculating the Tier 1 Capital Ratio
The Tier 1 capital ratio is a measure of a depository financial institution’s financial health and capital adequacy. 
Managing Wealth
Explaining RiskAdjusted Return
Riskadjusted return is a measurement of risk for an investment or portfolio. 
Markets
Calculating Tier 1 Common Capital Ratio
The tier 1 common capital ratio compares a financial institution’s core equity capital to its riskweighted assets. 
Markets
Explaining RiskWeighted Assets
Riskweighted assets is a banking term that refers to a method of measuring the risk inherent in a bank’s assets, which is typically its loan portfolio. 
Markets
How Equity Capital Markets Work
An equity capital market is a market existing between companies and financial institutions that raises money for the companies. 
Markets
Understanding Capital
Capital has a variety of meanings, but it generally refers to financial resources. 
Markets
What's Economic Capital?
While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures. 
Investing
Explaining Capital Employed
Generally, capital employed refers to all of the assets used in a business that contribute to the company’s ability to earn revenue. 
Investing
Key Financial Ratios to Analyze Investment Banks
Find out which financial ratios are most useful when analyzing an investment bank, and why tracking capital efficiency is especially important. 
Investing
Understanding the Capital Adequacy Ratio
The capital adequacy ratio (CAR) is an international standard that measures a bank’s risk of insolvency from excessive losses. Currently, the minimum acceptable ratio is 8%. Maintaining an acceptable ...

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