How to Tell If a Stock Is Halal: Screening Apple Through AAOIFI's Ratios Step by Step

To know if a stock is halal you run it through three screens from AAOIFI Shariah Standard 21: (1) the company's main business must be permissible; (2) its interest-bearing debt must be under 30% of its 12-month average market capitalisation; and (3) income from non-compliant sources must be under 5% of total revenue. Below I take Apple (AAPL) through all three with its real published numbers, then show you how to sanity-check a screener app against the raw figures yourself.

Most UK Muslim investors rely on an app like Zoya or Musaffa to flash a green "compliant" or red "non-compliant" badge. That's fine as a starting point, but a verdict you don't understand is a verdict you can't defend, can't replicate when the app disagrees with a competitor, and can't update when a company's balance sheet changes. The good news: the underlying maths is just three divisions. Once you've done it by hand on one stock, you'll trust the screeners far more — and catch the rare cases where they're stale or wrong.

I'll use AAOIFI Standard 21 as the reference methodology because it is the most widely cited global standard and underpins most app screens. Other methodologies (Dow Jones Islamic, S&P Shariah, the older MSCI rules) use slightly different denominators — I flag the key differences as we go.

The three screens at a glance

A stock has to pass all three. Failing any one — even with a flawless core business — makes it non-compliant under the standard. Source: AAOIFI Shariah Standard No. 21, Financial Paper (Shares and Bonds).

Screen 1 — Business activity: the prohibited-sector list

This screen is qualitative and comes first because it's a hard gate: if the company's primary business is haram, no financial ratio can rescue it. Under AAOIFI, a company is excluded if its core activity falls into a prohibited sector:

• Alcohol — production, distribution, or a meaningful share of sales
• Conventional finance — riba-based banks, insurers, and lenders (this catches most high-street banks)
• Gambling — casinos, bookmakers, lotteries, betting platforms
• Pork — pork-product processing and distribution
• Adult entertainment — pornography and related content
• Tobacco — cigarettes and tobacco products
• Weapons — offensive armaments manufacture (defence is debated among scholars; some boards allow it)

Apply it to Apple: its business is consumer electronics (iPhone, Mac, iPad), wearables, and services (App Store, iCloud, Apple Music). None of that is on the prohibited list, so Apple passes Screen 1. Note the grey areas scholars still debate — Apple Pay touches financial rails, and some services (e.g. certain App Store content) raise questions — but the primary, revenue-dominant activity is clearly permissible, which is what Screen 1 tests.

Screen 2 — Interest-bearing debt under 30% of market cap

AAOIFI Standard 21 caps a company's conventional, interest-bearing debt at 30% of its trailing 12-month average market capitalisation. The logic: a Muslim shareholder owns a slice of the company, and you don't want that company to be financed predominantly through riba.

The formula:

Debt ratio = Total interest-bearing debt ÷ 12-month average market cap  → must be < 30%

Two practical notes that trip people up:

• "Interest-bearing debt" is not "total liabilities." You want only borrowings that carry interest — typically labelled "Term debt" or "Long-term debt" plus the current portion. Ignore accounts payable, deferred revenue, and operating lease liabilities for this ratio.
• AAOIFI uses market cap as the denominator (12-month average), not total assets. The Dow Jones Islamic and S&P methodologies use total assets instead — which is why two reputable screeners can disagree on the same stock. Always check which denominator an app uses.

Figures: term debt and total revenue per Apple's FY2024 Form 10-K (year ended 28 Sep 2024), reported via balance-sheet data; the original filing is on SEC EDGAR. Market-cap range cross-checked against historical market-cap data.

Screen 3 — Non-compliant income under 5% of revenue

Even a clean-business, low-debt company can earn a sliver of "tainted" income — most commonly interest earned on its cash pile and treasury investments. AAOIFI Standard 21 says this non-permissible income must be less than 5% of total revenue. If it passes but is above zero, you still purify your share of it (donate it to charity) — more on that in the FAQ.

The formula:

Income ratio = Non-compliant income ÷ Total revenue  → must be < 5%

The honest difficulty here is that companies rarely hand you a clean "non-compliant income" line. You have to assemble it from the income statement and footnotes: interest income, income from conventional-finance subsidiaries, and similar items. For a big tech firm the dominant component is interest income on cash and marketable securities, disclosed inside "Other income/(expense), net."

Revenue and "Other income/(expense), net" per Apple's FY2024 Form 10-K via income-statement data; the exact gross interest-income figure is broken out in the 10-K's "Other income/(expense), net" footnote on SEC EDGAR. Use the footnote figure, not the net line, for your own purification calculation.

Where to pull the inputs

Every number above lives in the company's annual report. For a US-listed company that's the Form 10-K on SEC EDGAR; for a UK-listed company it's the annual report on the company's investor-relations page or Companies House. Here's the map:

Skip the marketing summaries and go to the filing itself. The single biggest error beginners make is grabbing "total debt" or "total liabilities" from a finance website — those often bundle in non-interest items (leases, payables) and inflate Screen 2.

Reading a screener verdict — and checking it yourself

Apps like Zoya and Musaffa automate all three screens and refresh as filings update. When you open Apple in one, you'll typically see a green "Halal / Compliant" badge plus a breakdown: business activity OK, debt ratio ~3%, interest-income ratio ~1%. That should now line up with the maths you just did.

Three habits to make the verdict trustworthy:

• Read the ratio, not just the colour. A stock at 4.9% income or 29% debt is "compliant" but borderline — one bad quarter can flip it. A stock at 1% / 3% is robustly compliant.
• Check the methodology toggle. Some apps let you switch between AAOIFI (market-cap denominator) and Dow Jones/S&P (total-assets denominator). The same stock can read differently. Pick one standard and stay consistent.
• Spot-check the inputs when two apps disagree. If Zoya says compliant and another says not, open the 10-K, pull the term-debt and revenue lines, and run the two divisions yourself. The disagreement is almost always a stale data feed or a different denominator — and now you can tell which.

For UK investors, the practical takeaway: once a stock passes, you can hold it in a halal-screened Stocks & Shares ISA, but you still owe purification on your share of the non-compliant income each year.