- Islamic Economics
Islamic Ruling on Mudharib (in Mudharabah) Taking Profits Before the Final Calculation
Mudharabah is a form of partnership in Islamic economic systems involving two main parties: the capital provider (shahibul maal) and the entrepreneur or manager (mudharib). The capital provider supplies the funds, while the mudharib manages the business using those funds. Profits are shared according to a pre-agreed ratio, while losses are borne by the shahibul maal, except when losses occur…
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Scrub Daddy: An Inspirational Story of a Simple Business
Scrub Daddy is a simple product that has become one of the greatest success stories in the history of the television show Shark Tank. The initial idea came from a daily need: a sponge that could clean various surfaces more effectively. Within a few years, Scrub Daddy managed to reshape the household cleaning product market in the United States and…
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Work or Purchase in Places that Sell Alcohol?
In Islamic jurisprudence, working or buying food from a place that sells alcohol (khamr) involves several dimensions that must be analyzed thoroughly. The opinions of scholars from the four major schools of thought within Ahlus Sunnah wal Jama’ah—Hanafi, Maliki, Shafi’i, and Hanbali—help clarify these perspectives. This article will discuss these issues in detail, based on jurisprudential perspectives, evidence from the…
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Gross vs Net Profit: Understanding the Difference for Your Business
Running a business involves careful financial calculations, especially when it comes to calculating profit. Two terms that often come up in this context are gross profit and net profit. Understanding the difference between the two is crucial, as they can influence business decisions, pricing strategies, and the overall financial health of your business. This article will explain in detail the…
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Project Based vs Equity Based Financing
In project financing, two common methods are Project Based Financing and Equity Based Financing. These methods differ significantly in how funds are allocated and risks are managed. This article explores both financing methods, focusing on their application within Islamic finance principles, and highlights their advantages and disadvantages. Project Based Financing: Focus on Specific Projects Project Based Financing is a method…
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Activity Ratios: Know How Your Business Performs
Activity ratios are important indicators used to measure a company’s operational efficiency in utilizing its assets to generate revenue. By understanding various types of activity ratios, businesses can assess how effectively they are using their resources, such as inventory, receivables, and fixed assets. This article will discuss several key activity ratios, along with examples, to provide a clearer understanding of…
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Solvency Ratios: Can Your Business Pay Off Future Debts?
Solvency ratios are vital indicators of a company’s long-term financial health. They provide insight into a business’s ability to meet its long-term debt obligations without jeopardizing its operational viability or shareholders’ equity. While businesses may face periods of financial strain, maintaining strong solvency ratios can significantly reduce financial risk and enhance creditworthiness, making it easier for companies to attract investors…
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Liquidity Ratio: Can Your Business Pay Short-Term Debt?
Liquidity ratio is a crucial financial analysis tool used to assess a company’s ability to meet its short-term liabilities. By examining liquidity ratios, stakeholders can evaluate whether a company has enough liquid assets to cover its short-term debt obligations, thereby ensuring the financial health of the company. A strong liquidity position implies that a business is well-positioned to manage its…
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The Balance in Spending Wealth: Guidance from Surah Al-Furqan Verse 67
Surah Al-Furqan verse 67 provides essential guidance for Muslims on how to manage their wealth wisely. Allah subhanahu wa ta’ala says: “وَالَّذِينَ إِذَا أَنفَقُوا۟ لَمْ يُسْرِفُوا۟ وَلَمْ يَقْتُرُوا۟ وَكَانَ بَيْنَ ذَٰلِكَ قَوَامًا”(“And those who, when they spend, do so not excessively or sparingly but hold a middle way between those extremes.”)— (Surah Al-Furqan: 67). This verse emphasizes the importance of…
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How to Maximize Work to Gain Rewards
In Islam, work is not only about earning a livelihood but can also be a source of immense spiritual reward when carried out with the right intention and practices. Here are several steps to transform your work into a form of worship: 1. Set the Right Intention (Niyyah) One of the key aspects of Islamic teachings is that actions are…
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