**4.1 Capital adequacy requirement (CAR) test**

Two ratios (total Equities to total Assets ratio and Debt-to Equity ratio)are Examined using step wise method **Table 5** shows the result, **Table 6** shows model Summary between Z score and liabilities to Assets ratio, **Table 7** shows significance for each individual studied ratio As a result of **Table 7**, the model between Z score and capital adequacy ratios is developed as following:

Z score = 8.9 Total liabilities to Total assets ratio + 6.6 Equities to Assets ratio. Thus lesson to be learned that T. Liabilities/T. Assets has more effects on Z score than T .equities to T. assets. See the following **Table 8**.

It shows exclude variables. **Table 8** indicates that the best ratio that can measure Capital Adequacy is debit to Equity ratio.


*a Dependent Variable: Z Score*

*b Linear Regression through the Origin*

#### **Table 5.**

*Variables entered/Removed.a,b*


*Source researcher from data analysis.*

*a Predictors: T.Liabilities/T.Assets*

*b For regression through the origin (the no-intercept model), R Square measures the proportion of the variability in the dependent variable about the origin explained by regression. This CANNOT be compared to R Square for models which include an intercept.*

*c Predictors: T.Liabilities/T.Assets, Equity/ total assets ratio*

**Table 6.** *Model summary.*

<sup>1</sup> In Shariah compliance banks it is the profit paid to total assets.

<sup>2</sup> 3 In Shariah compliance banks it is profit earned to total assets
