Back to Learn ☪️ Shariah Screening 
Understanding Islamic Finance Ratios
March 10, 2025 · 1 min read
Islamic finance screening uses three main financial ratios to determine if a stock is permissible to invest in.
1. Debt Ratio
Total interest-bearing debt / Market capitalization must be below 30% (AAOIFI standard). This ensures the company isn't overly reliant on interest-based financing.
2. Cash & Interest-Bearing Securities
Cash and interest-bearing investments / Market capitalization should be below 30%. Companies sitting on large cash reserves in interest-bearing accounts raise concerns.
3. Impermissible Revenue
Revenue from non-permissible activities / Total revenue must be below 5%. This covers things like alcohol sales, gambling, or conventional financial services.