Salam,
Can someone please explain step by step how to read a balance sheet & steps to determine if a security is shariah compliant or not? Not all companies are listed on Zoya app
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As-salamu Alaykum,
As far as I know, there are 5 methods and 2 processes.
The first is simple:
Does the company deal in haram:
Riba
Alcohol
Entertainment
Drugs
Harmful content
Pork
Haram meat
Etc
The second is a matter of discussion, the are five means:
AAOIFI
FTSE
S&P
DJIM
MSCI
The methodologies for each can be extensive so I recommend looking at the individual rule books.
In general, as in the common themes, the following rules are applied:
Debt is not more than 30% of their marketing cap
Interest bearing debt is not more than 33% of their total assets
Impure income is not more than 5% of their total profit
Cash, interesting bearing assets, and other non-compliant assets are not above 30/33%
This is not an extensive list of rules but a general theme, please look into each or a single methodology and use that.
Zoya in particular uses AAOIFI methodology.
Jazakhalla khairan,
Maheen