June 2007 Capital Adequacy Extension © Copyright 2007, CCRO. All rights reserved. Page 17 of 92 • How does this affect the equity I have in my company (Economic Capital Adequacy)? There is some overlap in Financial Liquidity and Economic Value particularly since the equity available to fund economic capital requirements also represents ownership in the company’s liquid assets. Additionally, in some cases equity can be converted to liquid assets to service short term obligations. Nonetheless, this does not imply that evaluating Economic Value and Financial Liquidity as distinct and separate will lead to a “double counting”. While Economic Value and Financial Liquidity are related, it is important to recognize these as two different areas that will yield different outcomes in light of the company’s obligations and risks. The following pages provide details on the building blocks of capital adequacy as represented in Figure 2.1 above.