Rules for Calculating Profit in Financial Transactions — practice questions

Correct answer: B. Clauses 4/1 and 4/2: There is no upper limit on profit, provided the transaction is based on mutual consent, with due regard to kindness, contentment and clemency. In principle, a regulator may not cap profits; however, in monopoly situations, extraordinary circumstances and cases of clear public interest, it is permissible to fix the profit rate, provided it is not prejudicial.

Correct answer: D. Clause 5: It is permissible to increase the profit in credit sales compared with cash sales, provided that the increase is incorporated into the price and that the amount of the debt is not increased on account of late payment. Once the price is fixed it becomes a debt, and any later increase for delay would be Riba (see Shari’ah Standard No. (8), Clause 5/7).

Correct answer: A. Clauses 6/1 and 6/2: Murabahah profit may be a fixed amount added to cost or a percentage of cost. A well-established, mutually agreed benchmark may be used to determine the profit at the promise (Wa’d) stage or on conclusion, but in all cases the total price and the dates and amounts of any instalments must be stipulated and may not vary with movements of the benchmark (see Clause 4/6 of Shari’ah Standard No. (8)).