FIN 451 Chapter 5

What is the primary objective of Islamic banks?

• To maximize profits at any cost

• To ignore the principles of Islam

• To provide Shari’ah compliant financing and investment solutions

• To engage in unethical practices

According to idealist scholars, what is expected of Islamic banks in terms of profits?

• Provide Halal returns to shareholders and depositors

• Maximize profits regardless of ethics

• Engage in Riba to increase profits

• Ignore the interests of shareholders and depositors

What is the view of realists regarding Islamic banking in comparison to conventional banking?

• Islamic banks are not new entrants in the market

• Islamic banks operate at a disadvantage compared to conventional banks

• Islamic banks have a regulatory advantage over conventional banks

• Islamic banks are not required to follow market conditions

Why is the money market vital for liquidity management for financial institutions like banks?

• To engage in unethical practices

• To manage liquidity efficiently

• To maximize profits through risky investments

• To avoid regulatory compliance

What are Ijarah Sukuk and how are they used by Islamic financial institutions?

• Used for short-term gains only

• Not compliant with Shari’ah regulations

• Used for speculative trading in the stock market

• Alternative of treasury and corporate bonds, used to earn returns from underlying assets

What is required for a company's stocks to be considered Shari’ah compliant?

• Core business must engage in unethical practices

• Core business must be profitable at any cost

• Core business must ignore Shari’ah regulations

• Core business must be Halal and comply with certain financial ratios

What do realists believe Islamic banks need to do to succeed in the market?

• Be competitive, liquid, and solvent in the short term

• Ignore market conditions and regulations

• Maximize profits through unethical means

• Avoid competition with conventional banks

Why is efficient liquidity management crucial for Islamic banks?

• To avoid competition with conventional banks

• To maximize profits through risky investments

• To engage in speculative trading

• To follow Shari’ah compliance regulations