Analysis of

Financial Statements
Session # 10
21-Nov-2020

Today’s topics
Analysis of :
1. Financing Liabilities
2. SUKUKS

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 Part 1
Financing Liabilities

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Balance Sheet Debt
• Only principal is reported - actual liability i.e interest payable is not
• Current Liability
• Operating Activity
• Trade Liability – AC Payables – purchases on Credit
• Advance from Customers for sales to be made
• Financing Activity
• Short Term Debt
• Current Portion of LT Debt
Shift from Operating to financing liabilities signal beginning of liquidity crisis
• Long Term Liability
• Principal
• Interest
• Tenor
Structure of interest and principal varies widely however conceptually
identical
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Long Term Debt

2,345,263 3,084,211

454,737 515,789

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 March 2018

30-Jun-19 30-Jun-18
Syndicated Long Term Finance - Line II - Islamic 2,345,263.00 3,084,211.00
Syndicated Long Term Finance - Line II - Conventional 454,737.00 515,789.00
Syndicated Long Term Finance - Line II - Total 2,800,000.00 3,600,000.00
10 equal semi annual installment i.e 800,000.00 400,000.00
4,000,000 M / 10 = 400,000 M per installment
Installments applicable Sep 2018 Mar 2018
Mar 2019
How much Cash outlay will be required by the company for the year 30-Jun-2020 pertaining to this loan
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For the year ending 30-Jun-2020 the company will be required to pay 2 more installments
i.e 400,000 M x 2 = 800,000 M pertaining to Sep 2019 and Mar 2020 Installment
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How much Cash outlay will be required by the company for the year 30-Jun-2020 pertaining to 17.2, 17.3 & 17.4
Assignment for next week

Read , understand and compile information pertaining to Current Year Long Term
Financing.

Incase of NO Long Term Financing – mention so in your assignment

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End of Part 1
Financing Liabilities

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Class Exercise

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 Part 2
SUKUKs

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What are SUKUKs ?
Sukuk is the standard Arabic term for Securities or Bonds structured according
to the principles of Shariah

Accounting and Auditing Organization of Islamic Financial Institutions

(AAOFI) defines Sukuk as :

“Certificates of equal value representing undivided shares in

ownership of tangible assets of a particular project or special
investment activity”
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SUKUK Structre

SUKUK Structure
 A. Corporate needs financing for Operations, Growth or for paying off their existing
facility.
SUKUK Transaction Flow : B. Corporate speaks to an Investment Bank / Financial Consultant for arranging
SUKUK issue
C. Special Purpose Company (SPC) is formed by Investment Bank / Financial
Consultant.
D. Corporate sells its specific assets (to be used for SUKUK issue) to SPC on Short Term
Credit
E. SPC divides the assets purchased from the Corporate in to many small units
(SUKUKs).
F. SPC sells these SUKUK units to investors on Cash.
G. Cash received by SPC from the sale of Sukuk units is utilized to settle Short Term
Credit payment to Corporate.
H. SPC on behalf of the investors rents out the assets to the Corporate to use.
I. Corporate uses the assets and pays regular rental to SPC for the use of the asset
J. SPC distributes the rentals received from the Corporate to the investors in
proportion to their investments in Sukuk at regular intervals.
K. On every installment date, SPC on behalf of the investors, sells a portion of asset
held under the Sukuk unit to the Corporate on cash.
L. Gradually , over the period of the Sukuk, entire portion of asset held by the
investors under the Sukuk Unit is sold to the Corporate and the Corporate becomes
the legal owner of the Asset.
M.The term of the Sukuk concludes.
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 Repayment
Repayment
Schedule
Schedule
of a Conventional
of a SUKUK Loan
Annual Markup Rate = 7.50%
Half Year Rate = 3.75%
Unit
Principal
Purchase Rental
MarkAmount
up Installment
Total Balance
Asset
Payment
Price Amount
Payable Outstanding
Value
5,000
1 500 187.50 687.50 4,500
2 500 168.75 668.75 4,000
3 500 150.00 650.00 3,500
4 500 131.25 631.25 3,000
5 500 112.50 612.50 2,500
6 500 93.75 593.75 2,000
7 500 75.00 575.00 1,500
8 500 56.25 556.25 1,000
9 500 37.50 537.50 500
10 500 18.75 518.75 -
Class Exercise :
End of Part 2
Thank you

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