Total Asset-To-Capital Ratio - TAC

What is the 'Total Asset-To-Capital Ratio - TAC'

A leverage covenant placed on Canadian Institutions regulated by the Office of the Superintendent of Financial Institutions (OSFI). The total asset to capital ratio is computed by taking the total assets divided by capital. It is not a risk-adjusted leverage measure and all Canadian banks are subject to a maximum TAC ratio of 23 times as of 2009.


Also referred to as the TAC Multiple.

BREAKING DOWN 'Total Asset-To-Capital Ratio - TAC'

TAC restrains the growth of banks because it restricts how many debt securities a bank can issue. Another way of looking at it is the amount of leverage a financial institution can take on.


An example of the TAC ratio would be that at a TAC ratio of 20-times, you can borrow $1900 and put in $100 to have $2000 in assets. The lower the ratio the more risk you can handle. If you have a high TAC ratio and the assets drop in value, there can be substantial losses as witnessed by American financial institutions during the late 2000s credit crisis with TAC ratios well over 40 in some cases.

RELATED TERMS
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ...
  3. Capitalization Ratios

    Indicators that measure the proportion of debt in a company’s ...
  4. Tier 1 Leverage Ratio

    The relationship between a banking organization's core capital ...
  5. Risk-Adjusted Capital Ratio

    A measure of a financial institutions that compares total adjusted ...
  6. Long Term Debt To Total Assets ...

    A measurement representing the percentage of a corporation's ...
Related Articles
  1. Markets

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  2. Trading

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  3. Investing

    Debt Ratios

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
  4. Trading

    The Debt To Equity Ratio

    The debt to equity ratio identifies companies that are highly leveraged and therefore a higher risk for investors. Find out how this ratio is calculated and how you can use it to evaluate a stock.
  5. Investing

    Debt Ratios: The Debt Ratio

    By Richard Loth (Contact | Biography)The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. ...
  6. Markets

    4 Leverage Ratios Used In Evaluating Energy Firms

    Analysts use specific leverage ratios to compare firms within an industry. A basic understanding of these ratios helps when evaluating oil and gas stocks.
  7. Investing

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  8. Investing

    Total Debt to Total Assets

    Total Debt to total assets, also called the debt ratio, is an accounting measurement that shows how much of a company’s assets are funded by borrowing. In business, borrowing is also called leverage.
  9. Investing

    Calculating Long-Term Debt to Total Assets Ratio

    A company’s long-term debt to total assets ratio shows the percentage of its assets that are financed with long-term debt.
  10. Investing

    Analyzing Oracle's Debt Ratios in 2016 (ORCL, SAP)

    Learn how the debt ratio, debt-to-equity ratio and debt-to-capital ratio are used to evaluate Oracle Corp.'s liabilities, equity and assets.
RELATED FAQS
  1. Besides operating leverage, what are other important forms of leverage for businesses?

    Learn about what other forms of leverage exist for businesses besides operational leverage, and the primary leverage metrics ... Read Answer >>
  2. How do stock dividends affect the retained earnings account?

    Understand the difference between financial ratio analysis and accounting ratio analysis. Learn why ratio analysis is important ... Read Answer >>
  3. What are financial risk ratios and how are they used to measure risk?

    Explore some of the primary financial risk ratios that investors and analysts commonly use to evaluate a company's overall ... Read Answer >>
  4. How do I use ratios to perform a financial analysis?

    Learn which ratios are used in fundamental analysis. Find out how analysts measure company performance and financial health ... Read Answer >>
  5. How can I calculate the leverage ratio using tier 1 capital?

    Learn about the tier 1 leverage ratio, how to calculate the tier 1 capital ratio and what this leverage ratio indicates about ... Read Answer >>
  6. What ratios are most commonly used to judge working capital management?

    Learn about the various working capital ratios that investors and analysts consider when evaluating a company's financial ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center