Safwa Bank showed the below financial data at the end of the year: numbers are in Jordanian Dinar JD.

Safwa Bank has the following balances:

Current account                                                                                 25,000,000

Unrestricted Investment accounts                                                       70,000,000

Safwa Bank Equity                                                                              60,000,000

Equity already invested in various fixed assets.                                             30,000,000

Annual profit, revenue minus all expenses, from the investment of the above amounts                                                                                                                            10,600,000

Bank policy regarding percentage of funds to be invested:

Current accounts (at banks own risk)                         35%

Unrestricted Investment accounts                                         90%

Equity Available for Investments                                100%

Safwa Bank deducts 7% of the Mudaraba net revenue as profit equalization reserve and 7% of the investors’ share of profit as Investment risk reserve. The profit sharing as per the Mudaraba contract is 80% for investors, 20% for bank.

Calculate the Mudaraba Annual profit distributed between the investment account holders and equity holders. Also calculate the profit equalization reserve and the Investment risk reserve allocations.

Answer rating: 100% (QA)

Solution Annual revenue of Safwa bank 10600000give... View the full answer