If you operate as a Microfinance Bank, Payment Service Bank, or Mobile Money Operator under CBN (or your country's equivalent), you have a CAPITAL ADEQUACY RATIO requirement. CAR = (Tier 1 + Tier 2 Capital) ÷ Risk-Weighted Assets. Each asset on your books is weighted by risk (cash = 0%, government bonds = 0-20%, consumer loans = 75-100%, equity investments = 150-250%). The denominator scales with what you HOLD. The numerator scales with what your shareholders put in plus retained profits. If CAR drops below your regulatory floor (10-15% typically), the regulator restricts your operations. This lesson walks a balance-sheet snapshot through the CAR calculation conceptually, the journal entries are simple, the framework is the value.