The document explains the six Shariah screen criteria for purchasing stock:
1. The company's core business cannot violate Shariah principles such as involving interest, alcohol, pork, or gambling.
2. The ratio of interest-bearing debt to total assets must be less than 37%.
3. Non-compliant investments cannot exceed 33% of total assets.
4. Non-compliant income cannot exceed 5% of total revenue.
5. Illiquid assets must be at least 25% of total assets.
6. The market price per share must be greater than the net liquid assets per share.
The document explains the six Shariah screen criteria for purchasing stock:
1. The company's core business cannot violate Shariah principles such as involving interest, alcohol, pork, or gambling.
2. The ratio of interest-bearing debt to total assets must be less than 37%.
3. Non-compliant investments cannot exceed 33% of total assets.
4. Non-compliant income cannot exceed 5% of total revenue.
5. Illiquid assets must be at least 25% of total assets.
6. The market price per share must be greater than the net liquid assets per share.
The document explains the six Shariah screen criteria for purchasing stock:
1. The company's core business cannot violate Shariah principles such as involving interest, alcohol, pork, or gambling.
2. The ratio of interest-bearing debt to total assets must be less than 37%.
3. Non-compliant investments cannot exceed 33% of total assets.
4. Non-compliant income cannot exceed 5% of total revenue.
5. Illiquid assets must be at least 25% of total assets.
6. The market price per share must be greater than the net liquid assets per share.
The document explains the six Shariah screen criteria for purchasing stock:
1. The company's core business cannot violate Shariah principles such as involving interest, alcohol, pork, or gambling.
2. The ratio of interest-bearing debt to total assets must be less than 37%.
3. Non-compliant investments cannot exceed 33% of total assets.
4. Non-compliant income cannot exceed 5% of total revenue.
5. Illiquid assets must be at least 25% of total assets.
6. The market price per share must be greater than the net liquid assets per share.
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NAME:- M.
OSAMA NASEEM SAP ID:- 26670
SUBJECT:- BANKING AND TAKAFUL
“ASSIGNMENT NO3” Explain Shariah screen criteria for purchasing stock? Criteria 1. Business of the Investee Company The core business of the company must not violate any principle of Shariah. Therefore, companies that provide interest-based financial services such as conventional banks, insurance companies, leasing companies or companies involved in any other business that is not approved by Shariah, such as shares in alcohol, pork, haram meat, etc. Acquisition of Not permitted are companies that manufacture or sell, or engage in gambling, running nightclubs, distribution of obscene material, prostitution, etc. Criteria 2. Interest Bearing Debt to Total Assets It should be kept in mind that these businesses are mostly reliant on interest and that the ratio of Interest Bearing Debt to Total Assets should be less than 37% in order to comprehend the reasoning behind this criterion. Again, the same criterion applies: If a shareholder is personally opposed to such borrowings but has been overridden by the majority, these borrowing transactions cannot be ascribed to that shareholder. In this instance, debt is defined as any interest. Criteria 3. Non-Compliant Investments to Total Assets Less than 33% of total assets should be made up of investments that are not compliant with legislation. Among other conventional financial instruments, non-Shariah compliant investments include mutual funds, commercial paper, interest-bearing bank deposits, bonds, PIBS, FIB, T-bills, Cols, Cod's, TFCs, DSCs, and derivatives. Criteria 4. Non-compliant Income to Total Revenue The non-compliant income to total revenue ratio need to be lower than 5%. Total Revenue includes Gross Revenue as well as any additional funds received by the business. Income from gambling, interest-based transactions, Gharar-based transactions (derivatives), insurance claim reimbursement from a traditional insurance provider, any late payment fees in credit sales, income from casinos, addictive substances, alcohol, dividend income from the aforementioned businesses, or firms that have been deemed Shariah Non-Compliant as a result of failing to meet any of the aforementioned requirements. Criteria 5. Illiquid Assets to Total Assets Illiquid assets as a percentage of total assets should be at least 25%. According to Shariah, all assets outside cash and its equivalents are considered illiquid assets. Thus, long-term investments in organizations paying interest are seen as liquid according to Shariah, but stocks of raw materials and work-in-progress, as well as all other fixed assets, are regarded as illiquid. Criteria 6. Net Liquid Assets/Share vs. Market Price/Share The market price per share should be greater than the net liquid assets per share.
Discuss The Importance of Islamic Financial Institutions and Markets in Any Economy (Hint: You May Look at This Problem From The FOUR (4) Economic Units' Point of Views) - (5 Marks)
