How to determine that a stock is halal? Like Apple or Amazon.
Here’s the screening process of any halal stock:
Impure income earned through “interest” or other suspect earning:**
Many companies cannot escape small amounts of unlawful activities such as interest. Consequently, scholars have come up with a ceiling to deal with this issue. Hence, most scholars agreed that the revenue from unlawful activities should be almost negligible and should not exceed the 5 % benchmark of the total income.
Cash and debt compared to Total Assets or Average Market Capital
Scholars conclude that the total cash and debts in a company’s balance sheet should be less than 30-50% benchmark of the existing Assets or Average Market Cap, depending on the Shariah board.
Debt compared to Equity or Average Market Capitalization
Scholars conclude that the total debt in a company’s balance sheet should be less than 30-33% benchmark of Equity or Average Market Cap, depending on the Shariah board.
Account receivables are money owed by customers in exchange for goods and services provided by the company. Shariah considers AR as debt owed to the company. For example, most Shariah scholars agree that the ratio of the Accounts Receivables to Total assets or Market Capitalization should not exceed 33%.