what is solvency ii ratio?
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Under Solvency II, the solvency ratio is the ratio of eligible own funds to required own funds. ... A Solvency II ratio of 100% means that an insurer's capital is such that it will still be able to meet its obligations in the event of a severe shock that is expected to occur once in every 200 years.
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Leverage ratio – while capital adequacy ratio considers the ratio of risk-weighted assets (mainly loans) to capital, leverage ratio takes the available capital and divides it by the total assets. ... Risk management things mostly: measuring capital adequacy, leverage ratios, etc.
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The long-term debt-to-total-assets ratio is a coverage or solvency ratio used to calculate the amount of a company's leverage. The ratio result shows the percentage of a company's assets it would have to liquidate to repay its long-term debt.
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Norms and Limits For most companies the maximum acceptable debt-to-equity ratio is 1.5-2 and less. For large public companies the debt-to-equity ratio may be much more than 2, but for most small and medium companies it is not acceptable.
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Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.
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The optimal debt-to-equity ratio will tend to vary widely by industry, but the general consensus is that it should not be above a level of 2.0. While some very large companies in fixed asset-heavy industries (such as mining or manufacturing) may have ratios higher than 2, these are the exception rather than the rule.
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Receivable Turnover Ratio or Debtor's Turnover Ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
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Solvency ratios measure the ability of a company to pay its long-term liabilities, such as debt and the interest on that debt. It's one of many financial ratios that can be used to assess the overall health of a company.
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The debt ratio is defined as the ratio of total debt to total assets, expressed as a decimal or percentage. It can be interpreted as the proportion of a company's assets that are financed by debt. A ratio greater than 1 shows that a considerable portion of debt is funded by assets.
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The debt service coverage ratio (DSCR) is defined as net operating income divided by total debt service. For example, suppose Net Operating Income (NOI) is $120,000 per year and total debt service is $100,000 per year. ... It's also common to see an “x” after the ratio.
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['Liquidity Ratios.', 'Activity Ratios.', 'Debt Ratios.', 'Profitability Ratios.', 'Market Ratios.']
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Key Takeaways. The current ratio compares all of a company's current assets to its current liabilities. These are usually defined as assets that are cash or will be turned into cash in a year or less, and liabilities that will be paid in a year or less.
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As of 2020, under Basel III, a bank's tier 1 and tier 2 minimum capital adequacy ratio (including the capital conservation buffer) must be at least 12.5% of its risk-weighted assets RWA). That combines tier 1 and tier 2 requirements—the minimum tier 1 capital ratio is 10.5% and the minimum tier 2 is 2%.
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The following equation is sometimes used to forecast financial requirements: ... d) Payout ratio (POR = DPS / EPS): The less of its income a company distributes as dividends, the larger its addition to retained earnings- and hence the less its need for external financing.
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This ratio is defined as gross fixed capital formation divided by gross value added, in other words the share of GFCF in gross product. It provides an indication of how much of the total factor income is reinvested in new fixed assets. Normally that ratio is about 20–23% of gross value-added.
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Solvency is the ability of a company to meet its long-term debts and other financial obligations. Solvency is one measure of a company's financial health, since it demonstrates a company's ability to manage operations into the foreseeable future. Investors can use ratios to analyze a company's solvency.
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The calculation method for the NPL ratio is simple: Divide the NPL total by the total amount of outstanding loans in the bank's portfolio. The ratio can also be expressed as a percentage of the bank's nonperforming loans. ... Alpha Bank's NPL ratio is ($5,000,000/$200,000,000) = (5/200) = 0.025, or 2.5 percent.