The document discusses the concept of time value of money from both conventional and Islamic perspectives. It provides definitions of time value of money conventionally as considering time as a valuable economic resource and requiring compensation for postponing consumption or not investing funds. From an Islamic perspective, time value exists but return should not be related to interest on loans. The document compares key differences in how conventional and Islamic views treat money, time value, and risk/loss sharing. It provides examples of Islamic finance products that apply time value within Sharia constraints, such as murabahah, istisna, and salam contracts.
I need a 100 word reply to each of the following 8 forum post from.docxtroutmanboris
I need a 100 word reply to each of the following 8 forum post from a finance class. (800 words total):
Finance Forum Reply #1
By using ratios, financial analysts are able to “
predict financial variables and to evaluate relative performance” when looking at financial statements (Giacomino and Mielke, 1993).
This provides the advantages of being able to evaluate the strength and profitability of a company, as well as being helpful in identifying and predicting possible bankruptcy and financial distress (Giacomino and Mielke, 1993).
A disadvantage of using financial ratio analysis is that to be effective, a company has to have another company to compare to.
Without comparison, all of the financial data analyzed for a particular business could be useless.
This is especially the case with small, niche-type businesses (Accounting Explained, 2013).
Another disadvantage of using financial ratio analysis is that it is analyzing historical information, while the users of the data are more interested in “current and future information” (Accounting Explained, 2013).
References
:
Giacomino, D. E., & Mielke, D. E. (1993). Cash flows: Another approach to ratio
analysis.
Journal of Accountancy, 175
(3), 55.
Accounting Explained (2011-2013).
Advantages and Limitations of Ratio Analysis.
Finance Forum Reply #2
Making a choice of a ratio is determined on the present need and purpose of the individual. Liquidity, leverage and investment return are what can be used to study the usage of ratios. Strong liquidity, cash and capital help with the financing that a company has for any given project.
In the article by James Horrigan, it provides a short history of financial ratio analysis. It tells of the five financial ratios that are used for the studies. The financial ratios are: working capital-to-current liabilities ratio (WC/CL) for short term liquidity; cash flow-to-current liabilities ratio (CFCL) for cash position; net worth-to-total liabilities ratio (NW/TL) for long-term solvency; return on total assets (EBIT/TA) for profit-generating ability; and revenue-to-total (REV/TA) for managerial performance (Halim, Jaafar& Osmon). Ratios are formed to be simple and are an advantage with analysis.
In the article by Paul Barnes he gives two principals for using ratios, 1. To control for the effect of size on the financial variables being examined. The use of ratios was necessarily based on a hypothesis about the relationship between the numerator variable and the denominator size variable. 2. To control for industry-wide factors. Ratios aid comparisions between subject firm and its industry. As financial ratios are constructed from two accounting variables, the joint distribution will depend on the behavior of both the numerator and the denominator and on the relationship between these two coordinates.
1. Horrigan, J. O. (1968). A Short History of Financial Ratio Analysis. Accounting Review, 43(2), 284-294..
2. Barnes, P. (1987).
I need a 100 word reply to each of the following 8 forum post from.docxtroutmanboris
I need a 100 word reply to each of the following 8 forum post from a finance class. (800 words total):
Finance Forum Reply #1
By using ratios, financial analysts are able to “
predict financial variables and to evaluate relative performance” when looking at financial statements (Giacomino and Mielke, 1993).
This provides the advantages of being able to evaluate the strength and profitability of a company, as well as being helpful in identifying and predicting possible bankruptcy and financial distress (Giacomino and Mielke, 1993).
A disadvantage of using financial ratio analysis is that to be effective, a company has to have another company to compare to.
Without comparison, all of the financial data analyzed for a particular business could be useless.
This is especially the case with small, niche-type businesses (Accounting Explained, 2013).
Another disadvantage of using financial ratio analysis is that it is analyzing historical information, while the users of the data are more interested in “current and future information” (Accounting Explained, 2013).
References
:
Giacomino, D. E., & Mielke, D. E. (1993). Cash flows: Another approach to ratio
analysis.
Journal of Accountancy, 175
(3), 55.
Accounting Explained (2011-2013).
Advantages and Limitations of Ratio Analysis.
Finance Forum Reply #2
Making a choice of a ratio is determined on the present need and purpose of the individual. Liquidity, leverage and investment return are what can be used to study the usage of ratios. Strong liquidity, cash and capital help with the financing that a company has for any given project.
In the article by James Horrigan, it provides a short history of financial ratio analysis. It tells of the five financial ratios that are used for the studies. The financial ratios are: working capital-to-current liabilities ratio (WC/CL) for short term liquidity; cash flow-to-current liabilities ratio (CFCL) for cash position; net worth-to-total liabilities ratio (NW/TL) for long-term solvency; return on total assets (EBIT/TA) for profit-generating ability; and revenue-to-total (REV/TA) for managerial performance (Halim, Jaafar& Osmon). Ratios are formed to be simple and are an advantage with analysis.
In the article by Paul Barnes he gives two principals for using ratios, 1. To control for the effect of size on the financial variables being examined. The use of ratios was necessarily based on a hypothesis about the relationship between the numerator variable and the denominator size variable. 2. To control for industry-wide factors. Ratios aid comparisions between subject firm and its industry. As financial ratios are constructed from two accounting variables, the joint distribution will depend on the behavior of both the numerator and the denominator and on the relationship between these two coordinates.
1. Horrigan, J. O. (1968). A Short History of Financial Ratio Analysis. Accounting Review, 43(2), 284-294..
2. Barnes, P. (1987).
Here is all about what you seek on Working Capital Management.類類
Wide Areas about : Introduction,Meaning,Definition,Components,Factors influencing,
Working Capital management: Cash management(, Inventory management, Receivables Management, Inventory management and about factoring.
The Indian Financial Market Is Touted as Benchmark in Today’s Global Economic...paperpublications3
Abstract: To describe my contents in a concise manner the above topic throws light on credentials of a Indian financial market in both theoretical and pragmatic ways. Through this I want to highlight the working of share markets and how a common investor can achieve better return from his or her capital investment. Profit is the only “mantra” that can drive success in a capital market and for ensuring profitability one needs knowledge and self-interest. I feel privileged to write this topic and describe my own experiences of share market in a pictorial and best possible manner.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, Management of fund
Here is all about what you seek on Working Capital Management.類類
Wide Areas about : Introduction,Meaning,Definition,Components,Factors influencing,
Working Capital management: Cash management(, Inventory management, Receivables Management, Inventory management and about factoring.
The Indian Financial Market Is Touted as Benchmark in Today’s Global Economic...paperpublications3
Abstract: To describe my contents in a concise manner the above topic throws light on credentials of a Indian financial market in both theoretical and pragmatic ways. Through this I want to highlight the working of share markets and how a common investor can achieve better return from his or her capital investment. Profit is the only “mantra” that can drive success in a capital market and for ensuring profitability one needs knowledge and self-interest. I feel privileged to write this topic and describe my own experiences of share market in a pictorial and best possible manner.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, which is simply meant dealing with management of money matters.
Financial Management is efficient use of economic resources namely capital funds. Financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm. Here it deals with the situations that require selection of specific assets, or a combination of assets and the selection of specific problem of size and growth of an enterprise. Herein the analysis deals with the expected inflows and outflows of funds and their effect on managerial objectives. In short, Financial Management deals with Procurement of funds and their effective utilization in the business.
Management of funds is a critical aspect of financial management. Management of funds acts as the foremost concern whether it is in a business undertaking or in an educational institution. Financial management, Management of fund
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Palestine last event orientationfvgnh .pptxRaedMohamed3
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Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Model Attribute Check Company Auto PropertyCeline George
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This is a presentation by Dada Robert in a Your Skill Boost masterclass organised by the Excellence Foundation for South Sudan (EFSS) on Saturday, the 25th and Sunday, the 26th of May 2024.
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The Indian economy is classified into different sectors to simplify the analysis and understanding of economic activities. For Class 10, it's essential to grasp the sectors of the Indian economy, understand their characteristics, and recognize their importance. This guide will provide detailed notes on the Sectors of the Indian Economy Class 10, using specific long-tail keywords to enhance comprehension.
For more information, visit-www.vavaclasses.com
Sectors of the Indian Economy - Class 10 Study Notes pdf
TIME VALUE OF MONEY.pdf
1. Time value of money is a
critical consideration in
financial and investment
decisions. For example,
compound interest
calculations are needed
to determine future sums
of money resulting from
an investment.
INTRODUCTION
2. FUTURE VALUE
Future value (FV) is the value of a current asset at a
future date based on an assumed rate of growth.
3. 1) Single Payment
Example:
Rahim placed RM 1,000 in a saving account earning 8% interest compounded annually.
How much money will he have in the account at the end of 4 years?
Fn = P(1+r)n
F4 = RM 1,000 (1 + 0.08)4
F4 = RM 1,000 (1.3605) = RM 1,360.50
Fn = P(1+r)n
Fn = future value / the amount of money at the end of year
P = initial amount
r = interest rate or rate of return
n = number of years
4. 2) Multiple Payment
Examples:
Afiq plan to save in an account that pays 10% return per year. He put in RM 20,000 in the
first year, RM 30,000 in the second year and another RM50,000 in the third year. How much
will you have by the end of 10 years.
FV = RM20,000 (1+0.1)10+ RM30,000 (1+0.1)9 + RM50,000 (1+0.1)8
= RM20,000 (2.5937) + RM30,000 (2.358) + RM50,000 (2.144)
= RM51,874 + RM70,740 + RM107,200
= RM229,814
FV = P (1+r)n
FV = Future Value
P = initial amount
r = interest rate
n = number of years
5. 3) Future Value of an Annuity
Example:
Jane wishes to determine the sum of money she will have in her savings account at the end
of 6 years by depositing RM1,000 at the end of each year for the next 6 years. The annual
interest rate is 8%.
Sn = A ((1+r)n - 1) = RM1,000 (7.336)
r = RM 7,336
S6 = RM1,000 ((1+0.08)6 – 1)
0.08
Sn = A ((1+r)n - 1)
r
Sn = the future value of an n-year annuity
A = the amount of an annuity
r = interest rate
n = number of years
7. 1) Multiple Payment Present Value
P = present value
PMT = rm amount of each annuity payment
r = interest rate or rate of return
n = number of years
Example:
Assume that you plan to buy a real investment which is expected to give you an annual cash
inflow of RM10,000 in the first year, RM15,000 in the second year and RM8,000 in the third
year. If you wish to have a rate of return of 15%, what would be your purchase price?
P = RM10,000 (1/(1 + 0.15)^1) + RM15,000 (1/(1 + 0.15)^2) + RM8,000 (1/(1 + 0.15)^3)
= RM10,000 (0.8696) + RM15,000 (0.7561) + RM8,000 (0.6575)
= RM 25,297
8. 2) Present Value Annuity Factor
P = present value
PMT = rm amount of each annuity payment
r = interest rate or rate of return
n = number of years
Example:
You require a rate of return of 15% on your investment. You have identified an investment
which will give you a cash inflow of RM30,000 per annum for a period of five years. What is
the present value of you investment? (the present value is actually the price you would pay
for the investment)
p = RM30,000 (1-(1 + 0.15)^-5 / 0.15)
= RM30,000 (3.352)
= RM100,560
9. 1
DEFINITION OF MONEY FROM CONVENTIONAL
Commodity and
used to purchased
goods
3
2
4
Easy to distinguish
and estimate the value
of money
Imperishable
Relatively scarce
Widely marketable
5
10. DEFINITION OF MONEY FROM
ISLAMIC PERSPECTIVE
1 2 3 4 5
Medium of
exchange
Money has no
intrinsic
value
According to
ISLAM
=
Money can only
be used to
purchase goods
or services not a
commodity
All units of
money of the
same
denominatio
n are 100%
equal each
other.
Money has a
standard of
value that
measures the
relative value
of various
goods and
services.
11. THE CONCEPT TIME VALUE OF MONEY
IN ISLAMIC PERSPECTIVES
❖ Concept of money basically in Islamic perspective is not similar to
Conventional. Islam defines money as the medium of exchange and unit of
account and not store of value (Ahmad and Hassan, 2004).
❖ From the Shari‟ah scholars‟ view, money is considered as a capital when
it combines with other resources to carry out the productive activity like
Mudarabah and Musharakah that lenders do not share only profit but also
loss.
12. ❖ Time is considered as a valuable economic resource that can be explain
into two main position (Batcha, 2009)
1. Opportunity cost of postponing current consumption current
consumption brings more satisfaction than future consumption. Thus,
compensation should be made for utility forgone today.
2. Opportunity cost of not being able to invest funds in productive activity.
Owner of funds gives up possibility of earning a positive return on funds.
13. ❖ Nowadays the Application that offered by Islamic Bank has applied this
concept, for example, Profit loss sharing concept or Mudarabah transaction
that capital provider (Rabb-mal) has to a share of venture’s profits.
❖ Based on real sector that is business and trade of goods not in exchange
of monetary values and loans or debts and Shariah scholars allow any
incremental in a loan give to cover the price of a commodity in any sale
contract to be paid at the future date (Ahmad and Hassan, 2004).
14. ISLAMIC VIEW FOR TIME VALUE OF MONEY
TIME VALUE OF MONEY AND ITS PERSPECTIVE IN ISLAMIC FINANCE
i. This happens when all consumption and production activities take place within a given
time. As such, time is known to be a valuable economic resource and a point of reference.
ii. Another argument put forward which favors the time value of money concept is that it
holds greater merit. But an Islamic perspective, Time value of money does exist. The return
available to the individual saver does not always have to be related to riba-based
transaction.
iii. In the context of Shari‟ah is also established from the fact that Shariah prohibits mutual
exchanges of gold, silver or monetary values except when it is done simultaneously. Within
the context of Islamic finance, the Shari‟ah prohibits the mutual exchange of gold, silver, or
monetary values except when it is done simultaneously and equally.
15. CONVENTIONAL ISLAMIC
Money is a commodity besides medium of
exchange and store of value. Therefore, it can be
sold at a price higher than its face value and it can
also be rented out
Money is NOT a commodity though it is used as a
medium of exchange and store of value.
Therefore, it CANNOT be sold at a price higher
than its face value or rented out
Time value is the basis for charging interest on
capital.
Profit on trade of goods or charging on providing
service is the basis for earning profit
Interest is charged even in case the organization
suffers losses by using bank’s funds. Therefore, it
is not based on profit and loss sharing.
Islamic bank operates based on profit and loss
sharing. In case, the businessperson has suffered
losses, the bank will share these losses based on
the mode of finance used (Mudharaba,
Musharakah).
COMPARISON BETWWEN CONVENTIONAL AND
ISLAMIC PERSPECTIVE
16. CONVENTIONAL ISLAMIC
While disbursing cash finance, running finance or
working capital finance, no agreement for
exchange of goods & services is made.
The execution of agreements for the exchange of
goods & services is necessary, while disbursing
funds under Murabaha, Salam & Istisnaa
contracts.
Conventional banks use money as a commodity,
which leads to inflation.
Islamic banking tends to create link with the real
sectors of the economic system by using trade
related activities.
COMPARISON BETWWEN CONVENTIONAL AND
ISLAMIC PERSPECTIVE
17. ADVANTAGES OF TIME VALUE OF
MONEY
The concept of time valuation is only applicable in trade
and business of products, not in exchange of money
value and loans or debts
Time value of money is allowed in Islam for the
purposes of valuing assets and their usufruct, but it is
not acceptable for the purposes of any increase in the
principal of loans or debts.
18. Fulfill the human need directly
1
Time valuation of money in Islamic principle differs from
the conventional theory as money and commodities have
different characteristics.
Example:
i. MONEY has no intrinsic value, it is only unit of value or
medium of exchange. Can’t fulfil human needs on its own until
it is converted into a commodity.
ii. Money has no differential quality in the sense of the note of
RM100 is exactly the same as an old RM 100 note in terms of
value and quality.
19. 1
CONT…
iii. COMMODITY can fulfil human needs directly and can be
different quality.
iv. Commodities are traded or sold by describing the commodity
and giving specific details.
The Islamic perspective, which is based in the concepts of real
commodity prices and usufruct, is able to fulfill human needs
according to the real situation in the practice.
20. Improve the economic productivity
2
Since its concept based on the
real sector of the economic
activities, it encourages people
for working and trading
These economic activities increase
the system's level of real productivity
and advanced the national economy
in order to achieve rapid economic
growth and high living standards.
21. The stability of National Economy and society
3
Lead the stability to the
country’s economy since it
prevents the effects of
fluctuations and recessions.
It minimizes the socioeconomic
issues that occurred when the
traditional time value of money
was applied to the system
22. Represent the sample of products
in Islamic Banks that applied the
concept of “Time Value of money
in Islamic perspective.
SAMPLE OF PRODUCT IN ISLAMIC
FINANCE
23. Originally signified only the price determination method, called a cost-plus-profit or markup sale, in which
the seller or trader revealed his or her cost and the two parties negotiated a profit margin to add to the cost
as compensation for the trader’s work. Murabahah has evolved to mean both a sale whose price is
determined on a cost -plus basis and that is financed on credit (bay’al-muajjil) or in modern times the
trader role as financier has been taken over the banks.
1: MURABAHAH FINANCING
INSTRUMENT
CLIENT
ISLAMIC
BANKS
SELLER
MARKUP PRICE CASH
24. An Istisna contract is a sale in which the customers asks the seller to
manufacture a specific product for purpose, both parties agree on a price and
specifications for the product to be manufactured. If the product does not
conform to those specifications when it is delivered to the customer, he or she
may retract the contract. The two parties have flexibility when deciding
payment timing and mode: the price can be paid in a lump sum at the time of
the contract, in a lump sum in the future or over installment. (This mode
financing is usually used for aircraft manufacture, equipment installation at
factories, construction.etc)
2: ISTISNA FINANCING
INSTRUMENT
25. Bai’ Salam involves advance payment to a party for delivery of a thing in future. It
applies to the case in which things comes into the possession of the seller due to his
being their producer towards discharging his occupational functions, for instance a
wholesaler acquiring goods from a manufacturer and supplying them to the retailers.
The purpose of salam is to aid the traders for import and export business.
3: SALAM FINANCING
INSTRUMENT
CLIENT CLIENT CLIENT
26. In conclusion, obviously TVM in Islamic and TVM in conventional finance is
totally different in both theory and practice. The fact that Islam forbids riba
does not mean that it is against the concept of positive-time preference
(PTP). Furthermore, time valuation is possible only when goods are traded,
not when exchanging monetary values and loans or debts (Hassan, 2004).
As the concept of time valuation is possible only in business and trade of
goods not in exchange of monetary values and loans or debts. Therefore, no
time value can be added to the principal of a loan, or a debt after it is
created or the liability of the purchaser stipulated. The important
conclusion view in Islam is time value of money is acceptable in respect of
the pricing of assets and their usufruct, it is not acceptable with regard to
any addition to the principal of loans or debts.
CONCLUSION