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Glossary: Mudarib: Working Partner (brings effort) Ras-ul-Maal : Investment Rab-ul-Maal : Investor (brings capital) Wakeel : Agent Ameen Trustee Kafeel Guarantor Definition: This is a kind of partnership where one partner gives money to another for investing in a commercial enterprise. The investment comes from the first partner who is called “Rab-ul-Maal” while the management [...]

Allah Subhan-o-Tallah has declared that He will become a partner in a business between two Mushariks until they indulge in cheating or breach of trust (Khayanah). Definition and classification of Musharakah The literal meaning of Musharakah is sharing. The root of the word “Musharakah” in Arabic is Shirkah, which means being a partner. It is [...]

Ashraf Usmani THE CAPITALIST VIEW In order to understand the Islamic point of view fully, it would be better to have a look at the system of the distribution of wealth that is obtained under the capitalist economy. This theory can be briefly stated like this: wealth should be distributed only over those who have [...]

Learning Objectives: After going through this lecture, you would be able to have an understanding of the following topics 2-Stock Portfolio Theory Risk & Expected Return In this lecture, we will continue our discussion on the risk. One of the easiest way of calculating risk using probability is by understanding the chance that are embedded [...]

Learning Objective: After going through this lecture, you would be able to have an understanding of the following concepts. Capital Budgeting Techniques of Capital Budgeting Today, we will discuss Capital Budgeting—one of the most important topics in financial management. Capital budgeting is about investment in fixed assets. In addition, another type of investment could be [...]

After studying this lecture, you would be able to have a better understanding of the following. • Present Value and Discounting The Topics of this lecture are covered in the chapter 6 of our text book called Financial Management theory and practice by Eugene F. Brigham & Louis C. Gapenski. Objectives of present value: The [...]

After going through this lecture, you would be able to have an understanding of the following concepts. Financial Forecasting and Financial Planning. Methods of forecasting Before going into the detailed calculation of cash flow, it is important to know the principles behind financial forecasting and financial planning. Although, financial planning and forecasting cannot reduce the [...]

Rs.6 preferred stock, Rs.100 par value, callable at 102, Rs.102, 200,000 Shared authorized Rs. 12, 000,000 Common stock Rs.5 par value, 5,000,000 shares authorized: Issued Rs.10, 000,000 Subscribed Rs. 4,000,000 Rs. 14,000,000 Additional paid-in-capital: Preferred Rs.360, 000 Common (including subscribed shares) 30,800,000 Rs. 31,160,000 Retained earnings Rs. 2,680,000 Total stockholders’ equity Rs.59, 840,000 I) No [...]

Efficiency of operating cycle/process: It is determined by activity ratios, keeping in view the conversion process, which is as follows: Cash/assets —-→ Inventory —-→ Receivables —- → Cash Processing Sales, collection Operating Cycle=Inventory sale days (average) +Receivable Collection days (average). The shorter the operating cycle, the higher the quality of current assets and the greater [...]

d) Analysis by Preferred Stockholders If convertible, interest of preferred stockholders is similar to those of common one. If not, then their interest is similar to that of long-term creditors. Dividend Coverage Ratio: = Net income . Amount of annual preferred dividend Normal Ratio: 5 to 10 Note: Ratios should be used with other elements [...]

(b) Analysis by long-term creditors: Interest of long-term creditors is to see the long-term solvency of the business and rate of return on their loans. Solvency is the ability to meet outside liabilities from total assets. Indicators of solvency are the Long-term Solvency, which are as follows:- i) Debt –To-Total-Assets: The debt-to-total assets ratio is [...]

ANALYSIS BY RATIOS: Financial Ratios are like financial temperatures, which give the state of the health of a business. This analysis technique is most widely used. In these inter-linkages of Income Statement and Balance Sheet items are established and inferences are drawn there from. The analysis technique by Ratios would broadly consist of the following:- [...]

Preparing Cash Flows Ledgers are maintained on accrual basis; not on cash basis. Preparing Cash Flow involves converting accrual-based accounts into cash-based. In small business, cash flow statement is prepared directly from special journals for cash receipts and cash payments. For most businesses, such statement is prepared by analyzing Income Statement and balance sheet. Analyzing [...]

Cash flow statement shows, how cash was generated and how it was used during the period. These days, it is required by law to include this statement in financial statements, especially in case of financial statements of limited companies. Need For Cash Flow Statement For any business, it is important to ensure that: • Sufficient [...]

Other steps in the Accounting Cycle after the preparation of Financial Statements are:- h) Closing entries in Accounting Cycle. As previously stated, revenues increase owner’s equity, and expenses and withdrawals by the owner decrease owner’s equity. If the only financial statement that we needed was a balance sheet, these changes in owner’s equity could be [...]

ACCOUNTING CYCLE/PROCESS (Continued) Pre-paid costs e.g. Pre-paid rent, will be recorded as follows: Date Description L/F Dr. Cr. Prepaid Rent 12,000 Cash Account 12,000 Rent paid in advance Pre-paid costs e.g. Pre-paid rent, will be recorded as follows: Date Description L/F Dr. Cr. Rent Expense 1,000 Prepaid Rent 1,000 Recording rent expense Pre-paid costs e.g. [...]

We have assumed that the first month i.e. July was taken up in setting up of the business and no business activity as such took place in this month. It means there were no Revenues & Expenses and hence no Income Statement. Preparing Balance Sheet from Trial balance: involves re-arranging of items or Accounts in [...]

Accounting Almost every organization and individual maintains accounts and deals with accounting. In simple terms, it can be described as a record of Income and expenditure of a business organization, or budget vs. utilization, in the case of a government non-commercial organization. In the case of the business entity, accounting would deal with measuring, recording [...]

FORTAN The First High Level Language – FORTRAN I – John Backus 1957 FORTRAN stands FORmula TRANslating system. It was the first implemented version of FORTRAN as FORTRAN 0 (1954) was never  implemented. It was the first compiled high-level language designed for the new IBM 704, which had index registers and floating point hardware. At [...]

At the end forward engineering is carried out. It means incorporating the new business processes and rules in the system. Forward engineering requires application of SE principles, methods, and concepts to re-create an existing application. In most cases forward engineering does not simply create a modern equivalent of an older program, rather new user and [...]

The legacy system also needs to be assessed from an environment’s perspective. This involves looking at the supplier, failure rate, age, performance, support requirements, maintenance cost, and interoperability. These angles are elaborated in the following paragraph: Supplier stability: Is the supplier still in existence? Is the supplier financially stable and likely to continue in existence? [...]

A system is considered to be a legacy system if it has been in operation for many years. A legacy system has many components. These include business processes, business rules, application software, application data, support software, and system hardware. Maintaining Legacy System Maintaining legacy system is expensive. It is often the case that different parts [...]

Grouping of data into logical files is the result of combined effect of two grouping methods: How data is accessed as a group by elementary processes? (process driven) The relationship between the entities and their interdependency based on business rules. (data driven) The following guideline can be used for this purpose: Process Driven Approach Data [...]

The primary difference between an internal logical file and an external interface file is that an EIF is not maintained by the application being counted, while an ILF is. Definitions for Embedded Terms The following paragraphs further define ILFs and EIFs by defining embedded terms within the definitions. Control Information Control Information is data that [...]

Out of these 5, the two most widely used metrics for the measurement of software size are FP and LOC. LOC metric suffer from the following shortcomings: There are a number of questions regarding the definition for lines of code. These include: Whether to count physical line or logical lines? What type of lines should [...]

A project manager is tasked to ensure the successful development of a product. Success cannot be attained without understanding the reasons for failure. The main reasons for the failure of software projects are: changing customer requirements ambiguous/incomplete requirements unrealistic deadline an honest underestimate of effort predictable and/or unpredictable risks technical difficulties miscommunication among project staff [...]

T Lines ¬ T Lines for Analog Lines a.                   T Lines are digital lines designed for digital data b.                   However they can also be used for analog transmission (Telephone connections) c.                  Analog signals are first sampled and the Time Multiplexed T 1 Frame (Figure) a.       DS-1 requires 8 Kbps of overhead b.       To understand this [...]

Leasing – IAS 17 (Contd.) Present Value • Present value has been defined in the framework as: A current estimate of the present discounted value of the future net cash flows in the normal course of business. Time Value of Money Present Value & Future Value Present Value Factor Interest Rate Implicit in the Lease [...]

Presentation of Liabilities in Balance Sheet In our earlier lectures we have covered the assets side of the balance sheet. We will now start the liabilities side of balance sheet. You will remember that we had shown you a sample balance sheet. Let’s have a re-look at it just to refresh our memory and then [...]

IASB’s Framework In July 1989 the International Accounting Standard Board (IASB) (then IASC) produced a document, called framework for the preparation and presentation of financial statements. The Framework is, in fact, the conceptual framework upon which all IAS’s are based and hence which determines how financial statements are prepared and the information they contain. The [...]