Current ratio meaning

ARCHIVED: This Practice Note is archived and is no longer maintained. This tracker outlines the consultation papers issued by the Financial Conduct Authority (FCA) in 2022, together with the release of any follow-on rules and guidance. For FCA consultation papers from other years, see: FCA consultation paper trackers. For material from the Prudential Regulation Authority (PRA) from 2017 and the Financial Services Authority (FSA) from 2008 to 2013, see: PRA consultation paper tracker [Archived] FSA consultation paper tracker [Archived] Risk management and controls CP22/28 (PRA CP 15/22): Remuneration: Ratio between fixed and variable components of total remuneration The FCA and PRA are jointly consulting on removing the current limits on the ratio between fixed and variable elements of total pay (the ‘bonus cap’). The proposals in this consultation paper (CP) would take effect on the next calendar day after the final policy is published-expected in Q2 2023-and would apply to firms’ performance year commencing after that. Responses to PRA...

In this issue: UK, EU and international regulators and bodies Prudential requirements Operational resilience Financial crime and sanctions Complaints, compensation and claims management Investigations, enforcement and discipline Regulation of derivatives Sustainable finance and ESG Banks and mutuals UK MiFID II Consumer credit, mortgage and home finance Regulation of insurance Payment services and systems Fintech and cryptoassets Dates for your diary Financial Services Enforcement Database New and updated content Daily and weekly news alerts Intraday news alerts LexTalk®Financial Services: a Lexis®Nexis community UK, EU and international regulators and bodies FSCS confirms unchanged levy for 2025/26 and provides early forecast for 2026/27 The Financial Services Compensation Scheme (FSCS) has issued its latest Outlook levy update for 2025/26, stating the levy will hold at £356m—as projected in May 2025—with no further levy anticipated for firms across the rest of this financial year. A preliminary view for...

Corporate governance Barclays and Citigroup to lift bankers’ bonus cap Reports indicate Barclays plc will be the first UK lender to remove the bonus ceiling for its material risk takers, after shareholders at its May 2024 AGM authorised the board to set whatever fixed-to-variable pay ratios it deems suitable (see: Share Incentives weekly highlights-9 May 2024). The previous cap stemmed from EU-derived rules applying to UK staff, which the FCA and PRA abolished with effect from 31 October 2023 via their joint policy statement PS9/23-Remuneration: Ratio between fixed and variable components of total remuneration (bonus cap)-see: Share Incentives weekly highlights-26 October 2023-Company law, governance and regulatory issues. Mirroring JPMorgan’s stance, Barclays is expected to hold base salaries for material risk takers steady while permitting variable awards up to ten times fixed pay, replacing the prior two-times ceiling. There are also reports that Citigroup is making comparable changes for its London-based employees...

In this issue: Corporate governance Q&As Weekly highlights from other practice areas Corporate governance HSBC and Goldman Sachs to remove bankers’ bonus cap At its AGM this week, shareholders of HSBC Holdings plc approved scrapping the bonus ceiling for material risk takers, enabling the group’s remuneration committee to set what it considers to be appropriate ratios of variable to fixed pay for those individuals. More than 99 per cent of votes backed the resolution. The bank’s cap had reflected requirements that initially applied to UK-based employees under EU rules implemented in the UK—but which were withdrawn with effect from 31 October 2023 by the FCA and PRA via their joint policy statement PS9/23—Remuneration: Ratio between fixed and variable components of total remuneration (bonus cap)—see: Share Incentives weekly highlights—26 October 2023—Company law, governance and regulatory issues. HSBC’s AGM outcome follows reports earlier this week that Goldman Sachs had likewise chosen to lift the cap for its London-based workforce...

Loan market and developments Moody’s retains a ‘stable’ outlook for Bermuda’s banking sector, reflecting contingent liability risk linked to the island’s sizeable banking system. The agency notes that Bermuda’s very strong institutional framework, very high per capita income and robust external position are fundamental credit strengths that enhance the jurisdiction’s resilience to prospective shocks. The Bermuda Monetary Authority confirms that, as at September 2024, banks’ capital adequacy sits comfortably above Basel III minima, with the sector reporting: a risk asset ratio of 25.6%; a common equity tier 1 capital ratio of 24.2%; a leverage ratio of 7.7%. Looking ahead, no significant changes are anticipated to Bermuda’s banking or contract laws. Basel III regulatory standards have now been fully phased in, including the Liquidity Coverage Ratio, the Capital Conservation Buffer and the Net-Stable Funding Ratio requirements...

This Practice Note serves as a primer on financial covenants (financial undertakings). It outlines the rationale for using financial covenants, then describes how they are established and measured. It also covers the typical financial covenants seen in commercial finance, such as: minimum net worth test gearing ratio leverage ratio (or debt to equity ratio) current ratio (or acid test ratio) cashflow ratio interest cover ratio loan to value ratio Note that this Practice Note does not delve into financial covenants for specialist transactions in detail. The final section, however, signposts additional resources on applying financial covenants across various specialist transactions. Where relevant, it draws attention to provisions in the Loan Market Association (LMA) senior multi-currency compounded rates/term rates term and revolving facilities agreement for leveraged acquisition finance transactions (the LMA leveraged facilities agreement) (available to LMA members on the LMA website). Note also that the LMA investment grade facility documentation omits financial covenants because they are considered too...

Current ratio Date of calculations: [ insert date of calculations ] Formula: Current assets ÷ Current liabilities Calculation: Result: Result from previous month/year: % movement: If the ratio slips under 1.0, the firm lacks sufficient current assets to meet its current liabilities as they become due. Compare this outcome to the previous current ratio result. If the current ratio is declining and nearing 1.0, calculate the other ratios to gain a clearer view of why the firm is running out of money...

Cash and profitability ratio calculations Current ratio Formula: Current assets ÷ Current liabilities Calculation: 764,400 ÷ 534,200 Result: 1.43 Result from previous month/year: 1.39 % movement: 2.88% Should the ratio dip below 1.0, the business does not hold sufficient current assets to meet its current liabilities as they fall due. Set this figure against the earlier current ratio. If the current ratio is weakening and edging near 1.0, work out the other ratios to gain clearer insight into why the business is running out of money...