Topic 5: Long and short term financing

What is the typical maturity period for long-term financing?

• Less than 6 months

• 1 year

• More than 1 year

• 3 months

Which of the following instruments is used for long-term financing in Islamic finance?

• Ijarah

• Sukuk

• Commercial Paper

• Letter of Credit

Sukuk securities are structured to comply with Sharia by paying what instead of interest?

• Dividends

• Profit

• Bonus

• Commission

Sukuk resembles conventional bonds but complies with Sharia principles by avoiding interest (Riba).

• True

• False

Long-term financing typically has lower interest rates compared to short-term financing because it is usually unsecured.

• True

• False

Which of the following is NOT an advantage of long-term financing?

• Immediate growth

• Smaller monthly installments

• Perception of poor financial health

• Control retention

What is the main purpose of short-term financing?

• To finance long-term infrastructure projects

• To cover immediate operating expenses

• To provide large sums of capital for acquisitions

• To invest in long-term securities

What type of short-term financing involves an unsecured short-term debt instrument issued by a corporation?

• Sukuk

• Commercial Paper

• Letter of Credit

• Ijarah

Convertible Sukuk can be exchanged for real assets at the discretion of the sukuk holders.

• True

• False

What is a key feature of a Banker’s Acceptance?

• It is guaranteed by the buyer

• It is guaranteed by a bank

• It can only be used domestically

• It has no maturity date