Halal screening
Two balance-sheet ratios against market capitalisation and a test on the line of business, run across every listed US company over a billion dollars. Screened on AAOIFI’s limits, which are the strictest of the five published sets — a company clearing them clears the other four on these ratios as well.
Why a compliant company still pays some income that is not
The ratio tests admit a company with some interest-bearing debt and some interest-bearing cash, because the limits are thresholds rather than zeroes. A company inside them still earns a little interest, and a share of any dividend it pays is that interest passed through.
Purification is the practice of giving that share away rather than keeping it. The share is the company’s non-compliant income over its earnings — a dividend is paid out of earnings, not revenue — applied to the dividend received.
What this calculator works out, and what it cannot
| You need | Where it comes from |
|---|---|
| The dividend you received | The shares you hold, entered on the Zakat tab, times the trailing dividend per share; or the company’s Dividends tab for the per-share amounts and dates. |
| The non-compliant share of income | Worked out for you where it can be. For a company with a researched screen, its interest and impure revenue after tax over its earnings. For every other company, the interest it earned after tax over its earnings — interest only, so a floor: income from excluded activities would add to it. Where an index provider publishes a purification ratio for the company, you can type that in instead. |
| The amount to purify | The two multiplied together, per holding and in total, in the calculator above. |
Capital gains are a separate question
Scholars differ on whether a gain on the share price needs purifying at all, and those who say it does differ on the basis. This desk takes no position: it is a screening tool, and the question is a ruling rather than a calculation.