Answer to Question #209981 in Management for hammad tariq

Question

Ali & Co is the sole distributor of Haleeb Products for different areas of Lahore. Ali & Co purchases different products on 45 days credit directly from Haleeb. The minimum inventory holding period is 10 days and the Customer uses FIFO inventory system. The goods usually arrive in trenches with a gap of 5 days between two trenches. (Assume 4 trenches and delivery starts after two days of placement of order).

The client has approached Islamic bank for 120 days Murabaha Facility amounting to Rs. 30 million for purchase of Haleeb products at Profit rate of 10% p.a.

1) Kindly suggest the proposed process flow for the said transaction along with key points to check.

2) If Minimum inventory holding period is “1” day than what additional controls will be exercised.

3) If goods are directly delivered to the customers through “Haleeb’s” vehicle, can murabaha be offered in this case?

Answer 1

     i.           A customer/cardholder choses an item and then, presents a credit card to the merchant to purchase it.

      ii.           After the card is swiped, the merchant’s acquiring bank requests an electronic authorization from the cardholder’s bank account, so it can be verified that the funds are available.

    iii.           The electronic authorization, then, passes through the payment processing networks.

    iv.           Based on fund availability, the credit card-issuing bank will either approve or decline the transaction. The information, including the approval code for the transaction, are based back to the networks, the acquiring bank, and then, finally delivers it to the merchant’s point-of-sale machine or card reader.

      v.           The credit card-issuing bank transfers the money to the acquiring bank as a reimbursement for the item the customer just bought.

    vi.           The acquiring bank deposits the funds into the merchant’s bank account.

   vii.           The credit card-issuing bank bills the customer for the purchase made.

 viii.           The customer pays his/her credit card bill for the purchase that was made.

2.The aim of stock control is to minimize the cost of holding stocks while ensuring that there are enough materials for production to continue and to meet customer demand. Therefore, efficient management of the movement and storage of goods and material, including when to order and store goods to meet operational requirements, how to inspect and receive goods in order to have a balanced flow of stores, and managing stock recording, stock control and stocktaking.

3. Invoices for the purchases are available to the customer after the receipt of goods at the warehouse, so the price of the goods can only be confirmed after weighing the goods at the customer's premises.