A set of quantitative measures that are used in sifting through shares of corporations that sometimes undertake transactions in riba and other prohibitions even when their primary business is shari’ah-compatible. Subscription to, and transacting in, the shares of such corporations by way of trading or investing are allowable by shari’ah based on the following screening criteria or measures or parameters:

1. Line of business/ type of activity: it is impermissible to hold stocks whose core activities are related to alcohol, tobacco, arms, prostitution, gaming, conventional life insurance, pork products, casinos, conventional banking, etc. Sectors or companies that are affected by such activities are also out of scope of permissible businesses. The corporation should not state in its articles of association that its business involves riba-based transactions or any prohibited items or materials such as the above-mentioned.
2. Debt-to-market capitalization ratio: the total amount raised by interest-bearing borrowing- whether short or long-term- should not exceed 30% of the market capitalization of the corporation. However, interest-bearing borrowing is prohibited irrespective of the amount of loan. This ratio may also be constructed by relating debt to assets (debt/total assets < 33%).
3. Liquidity-to-market capitalization ratio: the total amount of cash assets and interest-bearing securities held by the corporation should not exceed 33% of the market capitalization of the corporation. This ratio may also be determined by relating liquidity to assets.
4. Receivables-to-market capitalization ratio: the total amount of accounts receivable and cash should not be more than 50% of the market capitalization of the corporation. This ratio may also be calculated by relating receivables to assets.
5. Income from prohibited sources: the total amount of income generated from prohibited non-compliant sources should not exceed 5% of the total income of the corporation irrespective of the source (a prohibited activity, a prohibited asset, etc). Furthermore, the total interest income should not exceed 5%.
6. Amount of interest-bearing deposits: the total amount of interest-bearing deposits, whether short-, medium-, or long-term, should not exceed 30% of the market capitalization of total equity. In principle, interest-bearing deposits are prohibited irrespective of the amount of deposits.

The above percentages are typically determined based on the last budget or verified financial position. Moreover, the stock universe should be monitored on an ongoing basis for shari’ah compliance and review should be carried out quarterly.