Exam 6: A capital ratio explanation needs the numerator and denominator
A ratio can deteriorate even while capital increases if required capital grows faster. State the precise framework and definitions before interpreting a movement. Capital available is not interchangeable with total assets or cash.
Worked example or practice scenario
For a generic illustrative ratio, available capital rises from 180 to 198 while required capital rises from 100 to 120. The ratio moves from 180% to 165%. The amount of available capital grew, but the ratio fell.
Try this next
Write a two-part movement explanation and identify possible exposure growth or eligibility adjustments requiring investigation. Use the actual framework’s definitions in exam preparation. Do not apply this generic ratio to a framework with a different numerator construction.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.