Islamic Finance – Islamic Capital Finance - Receivables
Receivables are frequently sums of money that customers owe the business. Receivables can be produced by loan or deferred payment sales. Businesses that only engage in lending are excluded as being uninvestable. As a result, it is presumable that the creation of receivables in businesses included in Islamic ownership occurs through the sale of products and services on a basis of deferred payment. Receivables must equal more than 50% of the company's total assets or market capitalization, which is the fundamental standard employed here. This makes sure that the bulk of the assets used to represent the shares being traded are not debt. The requirement has to do with whether it is legal to permit trading of the shares on a secondary market for their market value. The Shari'ah's view on debt serves as the foundation for this. Shari'ah forbids the sale of debt to a third party other than for its face value. So, the sale and purchase of shares of this firm would not be permitted if the only assets of the company were receivables since doing so would amount to selling debt to a third party at a price other than the nominal value. According to the selection criteria, the investee company's receivables should be less than 45% or 49%, as appropriate, of its total assets or market capitalization.
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