Student Corner

Winding up of Modaraba

2009-10-26T08:53:00.000-07:00

Following are the provisions in this regard.

A Modaraba floated for a fixed period of time or or achievement of a certain objective shall be wound up by the Modaraba company itself when that period has expired or that objective has been achieved.
It can also be voluntarily wounded up if all the directors of a Modaraba company make a declaration verified by affidavit, stating that they thoroughly examined the affair of Modaraba and they are of the opinion that Modaraba will be able to discharge its liabilities and also able to pay the amount subscribed by the certificate holder within a period of twelve months. This declaration and affidavit shall also be supported by a report of the auditor of the Modaraba.
A Modaraba can also be wound up by the Tribunal on an application made by the registrar if

1. In case of Modaraba that was formed for a fixed period of time and on the expiry of that time period, the Modaraba is not voluntarily wound up its management. Similarly condition will apply to a Modaraba that has been formed for a specific objective.
2. In case of any other Modaraba the Registrar has declared that:

* The Modaraba is unable to pay off its liability.
* The accumulated loses of Modaraba exceed 50% of the total capital of Modaraba
* The business of Modaraba is of fraudulent nature.

The tribunal can also windup any Modaraba if in the opinion of Tribunal it is fair and equitable to do so.

Types of Modaraba

2009-10-26T08:52:00.000-07:00

Modarabas can be classified in two different types:

* Multipurpose Modaraba
* Specific purpose Modaraba

1. Multipurpose Modaraba: Such a Modaraba has more that one objectives or purposes. For instance a Modaraba may be floated for funding a clinic, running a transport service and operating a departmental store simultaneously.
2. Specific purpose Modaraba: It has a specific or a single objective / purpose. Modaraba floated for a textile mill is an example of such a Modaraba.

Authorization of Modaraba:
The Registrar after obtaining approval from the Religious Board that the business of Modaraba is in conformity with Islamic Principles and after being satisfied that it is in the public interest to grant approval to Modaraba, will grant a certificate authorizing the floating of Modaraba. The registrar may impose any condition which he may deem fit.

Important conditions for Modaraba

2009-10-26T08:43:00.000-07:00

1. A Modaraba who runs the business can be a natural person, a corporate body, a group of persons, or a legal entity.
2. The conduct of business of Modaraba shall be carried out entirely by the Mudarib within the framework of authorization given in the Modaraba agreement.
3. Money received by the Rabbulmal shall be placed under the absolute disposal of the Modarib.
4. The liability of Rabbulmal is limited to his investment except otherwise specified in the Modaraba contract.

Once a company us registered a a Modaraba company it is eligible to float and manage Modarabas. For floating a Modaraba an application shall be made by the Modaraba company to the Registrar or Modarabas. This application shall be accompanied by the following.

* Name and type of Modaraba
* The conditions and amount of Modarabas to floated.
* Nature of the business to be undertaken by Modaraba and its future financial prospects.
* Mode of distribution of profits.
* The amount to be subscribed by the Modarba company to the Modaraba in its own name.

Cell

2009-10-24T05:36:00.000-07:00

Microscopic examination of any organism reveals that it is composed of membrane-enclosed structures called cells. The enclosing membrane is called the cell membrane or the plasma membrane. Cells vary enormously in size and shape, but even the largest cells would have to be much larger to be visible to the naked eye. Within this tiny object thousands of chemical reactions are taking place, all regulated, all designed to serve a specific function. Collectively these reactions serve the function of maintaining the cell and permitting to replicate when the time is right.
Perhaps the most amazing thing about the living cell is that so much organized activity takes place in such a small space. Sometimes the cells are connected into long chains. In multicellular organisms the cells associate to form specialized tissues.
The plasma membrane is a delicate, semipermeable, sheetlike covering the entire cell. Forming an enclosure prevents gross loss of intracellular contents. In many plant and bacterial cells a cell wall encompasses the plasma membrane. The cell wall is a more porous structure than the plasma membrane, but it is mechanically stronger because it is constructed of a covalently cross-linked, three dimensional network. The cell wall maintains a cell's three dimensional form when it is under stress.
The contents enclosed by the plasma membrane constitute the cytoplasm. The purely liquid portion of the cytoplasm is called cytosol. Within the cytoplasm are a number of macromolecules and larger structures, many of which can be seen by high-power light microscopy or by electron microscopy. Some of the structures are membranous and are called organelles. Organelles commonly found in plant and animal cells including the nucleus, mitochondria, the endoplasmic reticulum, the Golgi apparatus and the Lysosomes.

Soft Currency

2009-10-24T03:30:00.000-07:00

Definitions:

“A country's currency which is not acceptable in exchange for currency of other countries, due to unrealistic exchange rates.”

“Another name for "weak currency". The values of soft currencies fluctuate often, and other countries do not want to hold these currencies due to political or economic uncertainty within the country with the soft currency.”

Investopedia explains Soft Currency
Currencies from most developing countries are considered to be soft currencies. Often, governments from these developing countries will set unrealistically high exchange rates, pegging their currency to a currency such as the U.S. dollar.

Soft currency indicates a type of currency whose value may depreciate rapidly or that is difficult to convert into other currencies. It is generally less desirable than hard currency to users. Soft currency can be in the form of paper, electronic or debt-based "IOUs" which have in the past been used in place of hard currency.
As "bad money" generally displaces "good money" (good money being used as a store of wealth and bad money being used as a means of exchange), it is generally the case that governments, private banks and other issuers of money have replaced hard currency with soft where the opportunity to do so has been permitted by the populace. This behavior is commonly known as Gresham's law.

Introduction to World Textile Industry

2009-10-24T03:27:00.000-07:00

The history of development in World Textile industry was started in Britain as the spinning and weaving machines were invented in that country. High production of wool, cotton and silk over the world has boosted the industry in recent years. Though the industry was started in UK, still in 19th Century the textile production passed to Europe and North America after mechanization process in those areas. From time to time Japan, China and India took part in industrializing their economies and concentrated more in that sector.
According to statistics, the global textile market possesses a worth of more than $400 billions presently. In a more globalize environment, the industry has faced high competition as well as opportunities. It is predicted that Global textile production will grow by 25 percent between 2002 and 2010 and Asian region will largely contribute in this regard.
The textile industry, also called the "rag trade" in the United Kingdom and Australia, deals with the design and manufacturing of clothing items, and takes care of the distribution process, using textiles. Based on current statistics, the global textile market is at the moment worth a little more than $400 billion, in spite of the fierce competition textile industry had to face, from other industries.
Between 2002 and 2010 it is estimated that the global textile production will increase be a staggering 25 percent, with Asia being the region that is going to bring its major contribution to this tremendous growth.
Gobalisation, which would later take over, would help outsource the whole manufacturing process, particularly in areas where trade with textile was common. Leaders in this business changed their focus to the whiter collars, and it was that that the industry of fashion design emerged together with fashion modeling, which also started to flourish and t become in our days a million-dollar industry.

Green Revolution

2009-10-24T03:26:00.000-07:00

In the 1960s, Green revolution was introduced in Pakistan to cultivate the new wheat properly. The result was:
Pakistan produced 8.4 million tons in 1970, up from 4.6 million in 1965.
In 1968, when the administrator for the U.S. Agency for International Development (USAID) wrote in his annual report that there was a big improvement in Pakistan and India, he said, “It looks like a Green Revolution.” That is how the label ‘The Green Revolution’ got started. As an aside, the “greenies” have nothing to do with the Green Revolution, which is all about alleviating world hunger.
It can hardly be denied that since the late Sixties, the introduction of High-Yielding Varieties (HYVs) of a number of commodities, along with tube well irrigation and chemical fertilizers, has significantly improved the overall agricultural productivity in Pakistan.
Green Revolution in Pakistan has failed to live up to its promise of ending hunger, unemployment and poverty. An analysis of the time series data of the past four decades points to the worsening of inequalities in income and asset distribution, contributing to the poverty of one in every three Pakistanis [World Bank, 2002, 1992]. The article measures the distributional impact of the Green Revolution in three allied areas of tenurial security, rural employment and rural household income, which tended to decline correspondingly, worsening income and asset distribution. Based on this evidence, this article makes a case for equitable land distribution in rural Pakistan, where half of the population is landless [World Bank, 2002].
In the 1980s, the success of the Green Revolution spilled over to China, which is now the world’s biggest food producer.
Sub-Saharan countries suffer from poor soil and uncertain rainfall, a shortage of trained agriculturalists, and lack of technology among other things.
Biotechnology will help these countries accomplish things that they could never do with conventional plant breeding. The technology is more precise and farming becomes less time consuming. The public needs to be better informed about the importance of biotechnology in food production so it won’t be so critical.

Poverty in Pakistan

2009-10-24T03:25:00.000-07:00

Poverty has many dimensions in Pakistan.The poor in Pakistan have not only low incomes but they also lack access to basic needs such as education, health, clean drinking water and proper sanitation. The latter undermines their capabilities, limits their opportunities to secure employment, results in their social exclusion and exposes them to exogenous shocks. The vicious circle of poverty is accentuated when the governance structures exclude the most vulnerable from the decision making process.
Pakistan's Poverty Reduction Strategy Paper (PRSP) has noted that while the extent and depth of poverty measured through various approaches varies depending upon the indices used and definitions adopted, there was considerable agreement over the trends in poverty over recent years. There was broad consensus that the momentum gained in the fight against the poverty during the 1980's was lost during1990's, when poverty continue to rise in the 1990's. The PRSP noted that Pakistan did not have an official and well-accepted poverty line at the time which contributed to the debate.
According to the new official poverty line, it is inferred that the incidence of poverty has declined between 1986-87 to 1990-91, falling from 29 percent to 26 percent. Between 1992-93 and 2000-01 poverty increased by about 5 percentage points to 32 percent with the biggest jump in poverty taking place in 1993-94. One of the key reasons for the rise in poverty in 2000-01 has been the crippling drought which severely damaged Pakistan's agriculture. Overall agricultural growing, in by 2.5 percent in 2005-06. Almost 65.9 % people of Pakistan live in rural area and overwhelming majority of them depend directly or indirectly on agriculture for their livelihood.

Global Energy

2009-10-24T03:23:00.000-07:00

Global energy consumption is expected to increase steadily over the next twenty years. According to the International Energy Outlook 2001, the actual growth of world energy consumption increased from 207 quadrillion Btu in 1970, to 382 quadrillion Btu in 1999 which is anticipated further increase to 607 quadrillion Btu in 2020. Over this fifty year period, the consumption of energy will likely increase by about 200 percent, from 207 quadrillion Btu in 1970 to 607 quadrillion Btu in 2020. The largest increase in energy use will occur in the developing world. From 1999 to 2020, energy consumption in the developing countries is expected to climb 122 quadrillion Btu to 264 quadrillion Btu, depicting an increase of 116 percent. In other words, the increase in energy use in the developing world is roughly double that of all countries in the global economy. Because, firstly many developing countries are striving towards economic development and industrialization and will thus require additional energy. Secondly, virtually all of the increase in the world population over the next twenty years will take place in the developing world. Population growth will add over 1 billion people to the poorer regions, thus expanding the energy requirements for these regions.

Nuclear power energy

2009-10-24T03:22:00.000-07:00

Definition:

Nuclear power is any nuclear technology designed to extract usable energy from atomic nuclei via controlled nuclear reactions. The only method in use today is through nuclear fission, though other methods might one day include nuclear fusion and radioactive decay

Explanation:

Nuclear power is energy which is produced with the use of a controlled nuclear reaction. Many nations use nuclear power plants to generate electricity for both civilian and military use, and some nations also utilize nuclear power to run parts of their naval fleets, especially submarines. Some people favor an expansion of nuclear power plants because this form of energy is considered cleaner than fossil fuels such as coal, although nuclear power comes with a number of problems which must be addressed, including the safe disposal of radioactive waste products.

The process of generation nuclear power starts with the mining and processing of uranium and other radioactive elements. These elements are used to feed the reactor of a nuclear power plant, generating a reaction known as fission which creates intense heat, turning water in the plant into steam. The steam powers steam turbines, which generate electricity and feed the electricity into the electrical grid.

When nuclear power is used to power something like a submarine, the reactor runs the engines, with the steam directly powering the engines. In both cases, the reactor requires careful supervision, because runaway nuclear reactions must be stopped as quickly as possible to prevent serious problems. Many nuclear power plants have extensive automated systems which help to identify potential trouble spots, and these systems can also re-route power, turn off parts of the plant, and perform other tasks which make the plant safer and cleaner.

One of the advantages of nuclear power is that it does not produce greenhouses gases. It does, however, produce hazardous waste. Spent nuclear fuel is radioactive and extremely dangerous, requiring a substantial infrastructure to secure the power plant and to handle the fuel. Unfortunately, some nations do not have adequate measures for handling their spent fuel in place, and it is not uncommon to see “temporary” solutions for the storage of nuclear material which last for decades.

The process of mining and refining the necessary radioactive elements used in a nuclear power plant is also not very clean, and these elements require secure transport, which can add to the cost of nuclear power significantly. Several nations have instituted a moratorium on the development of nuclear power until these problems have been addressed.

GNI

2009-10-24T03:21:00.000-07:00

Definition:

Gross national income (GNI) comprises the total value produced within a country (i.e. its gross domestic product), together with its income received from other countries (notably interest and dividends), less similar payments made to other countries.

The GNI consists of: the personal consumption expenditures, the gross private investment, the government consumption expenditures, the net income from assets abroad (net income receipts), and the gross exports of goods and services, after deducting two components: the gross imports of goods and services, and the indirect business taxes. The GNI is similar to the gross national product (GNP), except that in measuring the GNP one does not deduct the indirect business taxes.

Gross National Income (GNI) comprises the total value k produced within a country (i.e. its Gross Domestic Product), together with its income received from other countries (notably interest and dividends), less similar payments made to other countries.

For example, if a British-owned company operating in another country sends some of its income (profits) back to UK, the UK's GNI is enhanced. Similarly, the repatriation of profit from a US-owned company operating in the UK will count towards US GNI, but not count towards UK GNI.

GDP

2009-10-24T03:19:00.000-07:00

Gross Domestic Product. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports

The most common approach to measuring and quantifying GDP is the expenditure method:

GDP = consumption + gross investment + government spending + (exports − imports), or,
GDP = C + I + G + (X − M).

"Gross" means that depreciation of capital stock is not subtracted out of GDP. If net investment (which is gross investment minus depreciation) is substituted for gross investment in the equation above, then the formula for net domestic product is obtained. Consumption and investment in this equation are expenditure on final goods and services. The exports-minus-imports part of the equation (often called net exports) adjusts this by subtracting the part of this expenditure not produced domestically (the imports), and adding back in domestic area (the exports).

As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It's not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.

GNP

2009-10-24T03:17:00.000-07:00

Gross National Product (GNP) is defined as the "value of all goods and services produced in a country in one year, plus income earned by its citizens abroad, minus income earned by foreigners in the country".

Gross National Product GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. Basically, GNP measures the value of goods and services that the country's citizens produced regardless of their location. GNP is one measure of the economic condition of a country, under the assumption that a higher GNP leads to a higher quality of living, all other things being equal.

Definitions of Trade cycle

2009-10-24T03:13:00.000-07:00

According to Hansen:
" Business cycles is the fluctuation in the employment output and prices."

According to J.A. Estay:
" Trade cycle are fluctuation in general business activity that appear through the inter related fluctuation of many specific cycles."
Nothing remains constant in this world. The only thing constant is change, similarly in the business world the economic climate never remains steady. It always keeps on taking new shapes and forms. This changing of economic climate is called trade cycle in economic terms.

According to J.M. Keynes:
" A trade cycle is composed of period of good trade characterized by rising prices and low unemployment percentages alternating with periods of bad trade characterized by falling prices and high unemployment percentage."
So a trade cycle is the combination of good and bad periods. In good periods there is high employment, productivity and rapid economic activity. In bad periods the economy becomes sluggish, prices fall and unemployment increases.

Index Numbers

2009-10-23T22:09:00.000-07:00

Definition:
" When you can measure what you are speaking about and express it in number, you know something about it; when you can't measure it, when you cannot express it in numbers, your knowledge of meager and unsatisfactory kind."

Introduction:
Money is an important element of our daily life and it is one of the most confusing and puzzling thing in nature. Everybody of us remembers going to the school canteen and purchasing coca cola just for Rs 4 only 12 to 15 years ago. Or ask your elders how much cheap were chicken, mutton, oil etc. in their childhood. As we people have grown up, prices too have grown up but the later phenomena is a tricky and complicated one.

Value of money:
Money of course has value in it. But this value is exposed to a considerable degree of fluctuations. This value is called the Nominal Value of Money. The other concept is of Real Value of Money.

Membership of IMF

2009-10-23T08:23:00.000-07:00

Any country can become a member of IMF by fulfilling certain terms and conditions. Initially the application of membership will be considered by the Executive Board. After that, if the Board is satisfied than it will submit a report along its recommendations about subscription, amount of quota and other terms and conditions, to the Board of Governors. The Board of Governors then ask the applicant country to fulfill the obligations of IMF membership required to sign the IMF's articles of agreement

Functions of IMF

2009-10-23T02:59:00.000-07:00

The functions of funds are as follows:

Establishment of Par value:
Every country determines the par value of the currency in terms of dollars or gold. IMF can alter those parties, when required to preserve the International equilibrium.

Assistance to Members:
IMF provided assistance to members in times of financial crisis. This assistance is provided by the way of following schemes:
BCF (Basic Credit Facility)
SAF (Structural Adjustment Facility)
ESAF (Enhanced Structural Adjustment Facility)

Gold management:
IMF also plays a role in managing gold reserves of member countries/

Information services:
IMF also provides information, technical services and policy advice to monetary authorities of member countries.

Cooperation with other institutions:
IMF also maintains contact with other International monetary institutions and helps them in achievement if mutual objectives.

Objectives of IMF

2009-10-23T02:27:00.001-07:00

The objectives are as Follows:

To promote co-operation among economies of world.
To strengthen the economies of member countries by making fund's resources available to them.
To promote exchange stability and to facilitate the expansion and balanced growth of International trade.
To lesson the chances of disequilibrium in the international BOP of member countries.
To reduce the poverty in member countries and to promote high employment by facilitating sustainable economic growth.

IMF

2009-10-23T01:14:00.000-07:00

The International Monetary Fund is an international organization. IMF is responsible for ensuring the stability of the International Monetary System. By observing exchange rates and balance of payments, it also looks after the global financial system. It also provides financial and technical assistance to its member countries on their request.

Origin:
To cope with the monetary problems that arose during the World War two a conference was held on July 1, 1944 at Bretton Woods, New Hampshire, Number of suggestions were proposed, leading finally to the establishment of an International Monetary Fund. In this conference the Article of Agreement was drawn up and it was signed by 29 countries. The fund started its operations in May 1946. Its registered office is in Washington DC and present 185 countries are its members.

Stagflation

2009-10-22T06:33:00.000-07:00

Stagflation is a name of such situation where inflation and unemployment simultaneously exist. Infect stagflation means high inflation in periods of high unemployment. The word stagflation is combination of two words "stagnation" and "inflation". Stagnation means high unemployment and inflation is a persistent rise in the general price level.

Different definitions of stagflation:
Stagflation has been defined by many economists in following ways:

According to J. Barro:
"Stagflation is a situation where a recession is accompanied by high and rising inflation."

According to G Thomas:
"Stagflation is the combination of stagnation or recession and inflation in the economy."

According to Gregory:
"Stagflation is the combination of high unemployment and high inflation in the stagnant economy."

Deflation

2009-10-22T06:32:00.000-07:00

The opposite of inflation is called deflation. It occurs when prices decline or when the rate of inflation becomes negative. However, it is not simply confined to all of prices, there is a simultaneous decline in employment, income, investment, production etc.
Inflation could be suitable in some circumstances but deflation is never desired by any economy.

Different definitions:

According to Macconal:
" Deflation is the fall in the general level of prices in the economy."

According to J.Bumol:
"Deflation refers to the sustained decline in the general price level."

According to Philips:
Deflation is a period during which level of prices decline and the value of money rises."

Different definitions of Inflation

2009-10-22T06:31:00.000-07:00

Inflation has been defined in different ways by different economists. In general inflation is a situation whereby there is a continuous and persistent rise in the general price level.
Following are some important definitions of inflation.

Silvorman:
"Inflation is the name given to the expansion of the money supplies whether in currency or credit in the excess of the amount justified by the government for the trade."

Pigou:
"Inflation exists when income is expanding more than in proportion to the income earning activities."

Hanson:
"Inflation is present when the volume of purchasing power is persistently running ahead of the output of goods and services so that there is a continuous tendency for prices both for commodities and factors of production to rise because the supply of goods and services and FPO's fail to keep pace with demand for them."

Ackely:
"A persistent and appreciable rise in the general level or average of prices."

Meyer:
"An increase in the prices that occurs after full employment has been attained."

Coulbourn:
"In inflation, too much money chases too few goods."

Crowther in his famous An outline of Money:
"In the state of inflation the prices are rising i.e., the value of money is falling."

Milton Friedman:
"Inflation is and can only be produced by increasing the quantity of money faster than the increase in outputs."

Evolution of Commercial Banking

2009-10-22T06:28:00.000-07:00

The origin and genesis of commercial baking can be traced back to before Christ. Infect there was one fundamental desire that paved the way for the development of commercial banking and that was the desire for credit.

The granting of the credit began thousands of years ago. In Babylon credit was given about 2000 B.C.
Dr. Crowther writes in his famous "An outline of Money"
"The present day bankers have three ancestors namely merchants, moneylenders and goldsmiths. A modern bank is something of each of these. It is said that money has no properties, it is flat so that it can be piled up and it is round so that it can circulate. The progeny of moneylenders is concerned with flat money, piled up money and savings. The progeny of goldsmith is concerned with round money, circulating money and cash."

The history of banking is closely related to the history of money. As monetary payment became important, people looked for ways to safely store their money. As trade grew, merchants looked for ways of borrowing money to fund expeditions. From the above it is clear that moneylenders, goldsmiths and merchants__ all contributed in the evolution of Commercial Banking.

Different definitions of banking

2009-10-22T06:27:00.000-07:00

Prof. G. Crowther says:
"The bankers business is to take the debts of the other people to offer his own in exchange and thereby creates money."
British Parliament says:
"Any firm or institution doing a bonafide banking business."
The word bonafide here means "safeguard".

Kent says:
" An organization whose principal operations are concerned with the accumulation of the temporary idle money of the general public for the purpose of advancing to others for expenditure."
Kinley says:
"A bank is an institution which receives deposits and advances loans."

According to Dr. Harts:
"A banker is one who in the ordinary cause of his business, receives money which he repays by honouring cheques of persons from whom or on whose account he received it."

According to Prof. Sayers:
"A bank is an institution whose debts are widely accepted as settlement of other people's debts to each other."

According to Cairncross:
"Bank is a financial intermediary dealer in loans and debts."

Banking Companies Ordinance 1962:
"Banking means the accepting for the purpose of lending or investing of deposits of money from the public repayable in demand or otherwise and withdrawable by cheque, draft order or otherwise."

So what we can say that a bank is a financial institution that is licensed to deal with money and it substitutes by accepting time and demand deposits, making loans and investing in securities.

Riba

2009-10-22T06:26:00.001-07:00

Meaning:
'Riba' is an Arabic word. It means increase, addition, expansion or growth.
In Banking and economic scenario, it means the additional amount which a lender recovers from the borrowers according to the fixed rate over and above the principal sum.

Usuary:

2009-10-22T06:25:00.000-07:00

Meaning:
This is an English word. According to the English Law Usuary is taking of a higher rate of interest that what is stipulated in law.
It should be made that there is no difference between interest charged on a loss and usuary.
Interest is that part of the usuary which have been authorized by law.

Interest

2009-10-22T06:23:00.000-07:00

Meaning:
In simple words interest is price of money. When you buy something you pay its price. Just like other commodities that we trade, money is also a commodity that can be traded (banks do this business) so when you take money from a lender you have to pay price for it. This price is known as interest.
According to the Encyclopaedia Americana
"Interest is the charge for the use of money"
According to New Encyclopaedia Britannica
"Interest is the price paid for the use of credit or money"
It is agreed that word "interest" by and large has the same meaning as "Riba".
It may be worth noticing here that any sum or amount can be called interest when it fulfils following two characteristics:

It has been calculated on the pre-determined rate.

It has no relationship with the risk of profit or loss that an enterprise ordinarily faces.

Significance of business finance

2009-10-22T06:18:00.001-07:00

Following are some important points relating importance of Business Finance:

Finance is the first and the foremost requirement of every business. It is the starting point of every business, industrial projects etc.
Finance is needed to purchase all sorts of assets. Even if credit is available some down payment have to be made.
Finance is necessary so that initial losses can be sustained and business can be allowed to progress gradually.
Certain businesses need services of specialized personnel. Such personnel have a rich experience in specialized fields and they can provide useful guidance to make business profitable. Finance is always needed so that services of such professionals consultants can be hired.
Finance is needed to purchase new equipment and keep business running.
Finance is very much needed to incorporate expensive IT products in the business
Advertisement is a luxury which all business can not afford. Huge Finance is required to pay off advertisement expenses.
Finance is very essential for efficient source management.
Finance is needed to make the business powerful, so that it can be sustained occasional losses and liabilities.

Define Business Finance

2009-10-22T06:14:00.000-07:00

Defining Finance:
Finance is the basic determinant of most business decisions. It lies at the base of every decision making process.

Other Definitions of Finance according to different writers:

According to C.A. Delter:
"All those activities which have to do with the provision and management of funds for the satisfactory conduct of business"

According to B.O. Wheeler:
"Business Finance is defined as that business activities which are concerned with the acquisition and conservation of capital funds, in meeting the financial needs and over-all objectives of business enterprise."

According to George Terry:
"Finance consist of providing and utilising the money, capital, rights, credit and funds of any kind which are employed in the operation of an enterprise."

According to Kriz and Dugger:
"Business Finance is the flow of capital and credit that makes business possible."