Three Filters and No Halal Test: Halal Ninja's Stock Screen, the Debt Ratio That Fails Apple and the Quick Ratio That Walks You Into Cash: A Sharia Analysis for Muslim Investors (2026)

Author: Zaid Alissa, CTO and Halal Finance Researcher | Published: September 2026 | Updated: September 2026

Halal Ninja published "Stock Picking: Screening" on 28 January 2021 as "the first in a series of posts where we discuss how to find specific company stocks to invest in". The premise is sound and stated well. There are thousands of listed companies, nobody can read them all, so you set filters in a screener, the author uses Finbox, and you get "a way to filter the thousands of companies down to tens". The article gives three reasons to exclude a company. You cannot trade it. It is not halal. Its financials are weak.

Then it lists the filters it actually applies, and the second reason disappears. There is a country filter, a quick ratio filter, a debt to equity filter and an operating margin trend filter. There is no business activity screen and no AAOIFI ratio. The only place the religion returns is the justification for the debt filter, where companies with a lot of debt are said to have a "heavy reliance on interest" which "impacts both the halal-ness of this company" and its financial health. The series never continued. On the live page the P/E Ratio section stops mid sentence at "While some investors specialize in turnaround businesses", the Revenue Growth section is a heading with nothing under it, and none of the five posts that followed on the site carries the "Stock Picking" prefix. The site's last post is dated 7 February 2022.

This article does for the screen what the previous two in this series did for the same author's deep value method and for this site's own seven gate run on the Russell 2000: it takes each filter, asks what it measures, and checks it against the Sharia test it stands in for. The debt filter rejects Apple and admits a footwear company that fails AAOIFI. The quick ratio filter rewards the balance sheet the fiqh of share trading is most suspicious of. Every figure comes from the companies' own filings on EDGAR, and the arithmetic is shown.

Four filters, each with a threshold, all set inside Finbox.

Trading country: United States, United Kingdom and Australia, the markets the author's broker supports, with Israel and China excluded "for ethical and religious reasons".

Quick Ratio = Current Assets (excluding Inventory) / Current Liabilities, passing above 1. A footnote offers the Cash Ratio, which counts only cash and marketable securities, as a stricter alternative.

Debt / Equity = Total Debt / Shareholder Equity, passing at 0 or above and below 50 percent. The article notes that negative equity, if prolonged, signals insolvency, which is why the floor is there.

Operating Income Margin = Operating Income / Revenue, passing when the three year compound annual growth rate of the margin is above 0 percent.

That is the whole screen, and it deserves a fair reading. The quick ratio asks whether the company survives the year, the debt filter whether it is over borrowed, the margin trend whether it is getting better at its business. Good questions, none of them a Sharia question, and the article's own list of reasons said one of the three would be.

AAOIFI's debt test, as set out by Mufti Faraz Adam in "Making Sense of the 30% Rule in Islamic Finance" (Amanah Advisors, 14 December 2020), is that "the collective amount raised as a loan on interest, whether long-term or short-term debt does not exceed 30% of the market capitalization of the corporation". Halal Ninja's test is Debt / Equity = Total Debt / Shareholder Equity, and shareholder equity means book equity, the accounting residual of assets minus liabilities. Both ratios have debt on top. They have entirely different things underneath, and for a large listed company the two denominators differ by more than an order of magnitude.

Apple is the clearest case. From its Form 10-K for the fiscal year ended 27 September 2025, filed on 31 October 2025: term debt was 12.35 billion dollars current and 78.328 billion non current, 90.678 billion in total, and total shareholders' equity was 73.733 billion. Debt / Equity = 90.678 / 73.733 = 123 percent. Halal Ninja's filter admits companies below 50 percent, so Apple is excluded at more than twice the ceiling. Add the 7.979 billion of commercial paper, which any screener's total debt field will include, and the ratio is 134 percent.

Now the AAOIFI divisor. Apple's market capitalisation was 4.77 trillion dollars on 3 September 2026, from stockanalysis.com, the same source our Apple present value analysis used. Debt / Market capitalisation = 90.678 billion / 4,770 billion = 1.9 percent, or 2.1 percent with the commercial paper. The ceiling is 30 percent, and Apple sits below a tenth of it.

The two answers diverge because the market values Apple's equity at roughly 65 times its book value: 4,770 billion divided by 73.733 billion. Book equity is what remains after years of buybacks have shrunk the accounting residual; it says nothing about what a shareholder is exposed to. Halal Ninja's screen therefore throws out a company our Apple analysis found compliant on the financial ratios, on a ground the article calls partly a halal one.

The error runs the other way too. Rocky Brands, a footwear company, reports in its 10-K for the year ended 31 December 2025, filed 11 March 2026, total debt of 122.642 million dollars under an agreement whose loans "bear interest at a variable rate equal to either (i) the Base Rate (as calculated in the ABL Agreement) or (ii) Term SOFR", and shareholders' equity of 252.088 million. Debt / Equity = 122.642 / 252.088 = 48.7 percent, below 50, so the debt filter admits it. Its market capitalisation was 328.67 million dollars on 3 September 2026. Debt / Market capitalisation = 122.642 / 328.67 = 37.3 percent, above 30, so AAOIFI refuses it. It would fall at Halal Ninja's quick ratio gate, at 0.93, but that is a liquidity judgement, not a riba one.

Same balance sheets, same debt. On both companies the ratio the article calls partly a halal test points the opposite way from the test the scholars wrote.

The numerator has a problem of its own. IFRS 16, effective for periods beginning on or after 1 January 2019, "requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months", and ASC 842 does the same in the United States. Data feeds routinely fold those lease liabilities into a field called total debt. A lease is not a loan. The rent a lessee owes is an ijarah obligation, a contract AAOIFI governs under Shari'ah Standard No. 9 on Ijarah and Ijarah Muntahia Bittamleek, and it carries no interest. A screener that counts it as debt overstates the riba exposure.

The effect is measurable. The seven gate run reported the Eastern Company's debt at 24.9 percent of total assets, from a commercial data feed. Eastern's own 10-K for the year ended 3 January 2026, filed 3 March 2026, shows a revolving loan balance of 33.902 million dollars, priced off SOFR plus a margin, finance lease liabilities of 3.989 million and operating lease liabilities of 15.965 million. Those three sum to 53.856 million. Total assets were 216.677 million, and 24.9 percent of that is 53.95 million. The feed's debt figure was the bank loan plus both classes of lease. At Eastern's market capitalisation of 165.48 million dollars on 3 September 2026, AAOIFI's ratio is 20.5 percent on the loan alone and 32.5 percent with the leases counted. One data field, read without checking, moves the company across the 30 percent line.

A quick ratio above 1 pushes a list toward companies whose current assets, mostly cash, securities and receivables, exceed everything they owe within the year. That collides with two Sharia rules.

The first is AAOIFI's second ratio, which Mufti Faraz Adam states as "the total amount of interest taking deposits, whether short, medium or long term, does not exceed 30% of the market capitalization of total equity". The second is older and goes to what a share is. In "Principles of Shari'ah Governing Islamic Investment Funds", Mufti Taqi Usmani makes it his fourth condition: "The shares of a company are negotiable only if the company owns some non-liquid assets. If all the assets of a company are in liquid form, i.e. in the form of money that cannot be purchased or sold, except on par value, because in this case the share represents money only and the money cannot be traded in except at par."

The fiqh is this. A share is an undivided claim on the company's assets. If those assets are money and receivables, the share is money, and paying more than its cash value for it is exchanging money for a larger sum of money; selling the receivables inside it at a discount is bay' al-dayn, the sale of debt, which the same paper says the traditional jurists were unanimous in prohibiting. Allah says in Surah An-Nisa, verse 29:

يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُواْ لَا تَأۡكُلُوٓاْ أَمۡوَٰلَكُم بَيۡنَكُم بِٱلۡبَٰطِلِ إِلَّآ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٖ مِّنكُمۡ

"O you who have believed, do not consume one another's wealth unjustly but only [in lawful] business by mutual consent." (Saheeh International, first clause of the verse)

Trade in a productive business is the lawful business the verse permits; trade in a pile of cash at a premium is not. Mufti Taqi Usmani reports three views on how much non-liquid asset the company must own: some scholars require 51 percent at the least, others accept 33 percent, and the Hanafi position allows any proportion provided the non-liquid part is not negligible and the share's price exceeds the liquid amount it contains.

The quick ratio measures none of this. It compares liquid assets to current liabilities; the Sharia test compares interest bearing deposits to market capitalisation, and a company can pass one while failing the other. Utah Medical Products shows it. From its 10-K for the year ended 31 December 2025, filed 27 March 2026: current assets 97.742 million dollars, inventory 7.935 million, current liabilities 2.598 million. Quick Ratio = (97.742 minus 7.935) / 2.598 = 34.6, against a filter asking for more than 1. Its cash of 85.756 million is held, in the 10-K's words, "in bank deposit accounts in addition to Fidelity Investment money market accounts", which the same filing says produce "non-operating interest income". Market capitalisation on 3 September 2026: 225.92 million dollars. Cash / Market capitalisation = 85.756 / 225.92 = 38.0 percent, above AAOIFI's 30 percent ceiling. The proxy is the one the seven gate run used, the whole cash balance standing in for interest taking deposits because the accounts do not split it.

Apply Mufti Taqi Usmani's condition and the picture sharpens. Utah Medical's non-current assets of 24.8 million plus inventory of 7.935 million are 32.735 million of 122.542 million total assets, 26.7 percent. Under the 51 percent and 33 percent views the shares would not be negotiable at all; under the Hanafi view they would, because the market price of 225.92 million exceeds the 89.807 million of liquid assets inside them. The company is well run and debt free. It is also, to a first approximation, a claim on a money market account, and that is what a quick ratio filter above 1 is built to find.

Apple sits at the opposite corner. Its quick ratio from the same 10-K is (147.957 minus 5.718) / 165.631 = 0.86, so the filter refuses it, while its cash and marketable securities of 35.934 plus 18.763 plus 77.723 billion, 132.42 billion, are 2.8 percent of 4,770 billion of market capitalisation, so AAOIFI admits it with room. The screen fails Apple twice, on debt and on liquidity, and neither time on a Sharia ground.

Riba enters a company from two sides, borrowing and lending, and Halal Ninja's screen looks at one through the wrong lens and at the other not at all.

On the borrowing side the debt filter over excludes and over includes at once, as Apple and Rocky Brands show, because book equity is not the divisor the standard uses. On the lending side there is no test. AAOIFI's income screen, in Mufti Faraz Adam's words, is that "the amount of income generated from prohibited component does not exceed 5% of the total income of the corporation". Utah Medical reports 2.808 million dollars of interest income against 38.52 million of sales, 7.3 percent, or 6.8 percent of total income once the interest itself is added to the base. Its long term debt is zero, so it posts the best possible score on the one filter the article calls a halal filter while earning more riba relative to its size than AAOIFI tolerates. Purification, the duty Mufti Taqi Usmani attaches to any such holding, that "the proportion of such income in the dividend paid to the share-holder must be given charity, and must not be retained by him", is never mentioned.

Gharar attaches classically to a contract and its object, and a stock screen is neither; extending it to the tool is this article's reasoning, offered as such. A screener is a claim about a company that the investor accepts without seeing the accounts, and the two fields this article checked, total debt and the equity divisor, both meant something other than what a Sharia investor would assume. Uncertainty you cannot inspect is the thing the prohibition warns against buying. The remedy is not to abandon screeners but to read one filing per candidate, which is what the previous article in this series did for its eleven cheapest names.

A quality screen is the opposite of maysir. Every filter in Halal Ninja's article is a stated rule, chosen before the ticker is seen, and that discipline is exactly what the deep value critique found missing from the same author's next post. Nothing here is a wager. The gambling risk in stock picking lives in what happens after the screen, when a story overrides a number, and the screen itself is the guard against it.

Two of the four filters are not Sharia filters and should not be read as such.

Excluding Israel and China "for ethical and religious reasons" is a boycott, not a ruling. Haram attaches to a prohibited contract or activity: riba, gambling, pork, alcohol. A decision not to own companies listed in a jurisdiction is a judgement of conscience or of maslahah, the public interest, which a Muslim is entitled to make, and it must not be confused with a prohibition, because a boycott admits of degrees and a prohibition does not. The Apple analysis works through the question on a single company. Note the cost the author accepts knowingly: excluding a whole exchange also excludes every compliant company listed on it.

The margin filter is a business quality test and sound as far as it goes. One technical limit: a compound growth rate is a ratio of end to start raised to a fractional power, and when the starting margin was zero or negative there is no real answer. A margin that went from 2 percent to 4 percent over three years grew at 26.0 percent a year; a margin that went from minus 2 percent to 4 percent has no growth rate a screener can return, so the filter silently drops it. That is a turnaround, the case the unfinished P/E Ratio section was about to raise, excluded by arithmetic rather than by decision.

The live disagreement is over the debt threshold and its divisor, and this article does not settle it.

Mufti Faraz Adam, in the Amanah Advisors article cited throughout, records how the number was reached. The 30 percent "was a result of querying that in the case of necessity, what level of exposure can be overlooked and considered as the maximum allowance for exposure to Riba in investments". Some scholars "proposed 49% as that is the final number to remain a minority"; others pointed to the narration of Sa'd ibn Abi Waqqas, whom the Prophet, peace be upon him, permitted to bequeath one third with the words "one-third is also excessive", and took one third as the benchmark. "Although 30% is not one-third, 30% was seen as a reasonable standard just below one-third to prevent the excessiveness from being within touching distance." He calls it an ijtihadi issue that has since gained "widespread scholarly acceptance", and ends with the question that hangs over every threshold: "if necessity is the underpinning impetus for the ratios, should the percentages be elastic to contextual changes?"

Mufti Taqi Usmani, in "Principles of Shari'ah Governing Islamic Investment Funds", reports the disagreement underneath the ratio rather than the ratio itself. One group of scholars holds that a shareholder is a partner and every partner is an agent for the others, so buying the share "embodies an authorization from the share-holder to the company to carry on its business in whatever manner the management deems fit", and a company that borrows on interest cannot be held at all. The larger group, with whom he sides, answers that a joint stock company is not a simple partnership, that a shareholder outvoted at the general meeting has not consented, and that "borrowing on interest is a grave sinful act for which the borrower is responsible in the Hereafter; however, this sinful act does not render the whole business of the borrower as haram". He specifies no divisor. What he adds is the duty that survives any threshold: object at the meeting, and give the interest proportion of the dividend away.

Sheikh Joe Bradford is Zoya's Shariah advisor, a role he states on his own site (joebradford.net, February 2020), and Zoya's help centre article on its screening, dated 14 April 2026, states the divisor plainly: "under AAOIFI, both interest-bearing debt and interest-bearing assets can't exceed 30% of the company's market cap". The same article notes that "other methodologies may use different denominators (like total assets instead of market cap)", that some use 33 or 33.33 percent to stay closer to the literal third, and that "market cap-based approaches tend to be more favorable for asset-light companies like tech, while total asset-based approaches may better reflect capital-intensive industries like manufacturing". That sentence is the divisor debate in one line, and it is why the seven gate run published a list under each convention. What none of the three positions uses, anywhere, is book equity.

A screen that actually applied "not halal" as its second reason would run in this order.

First, the business activity screen, before any number. Mufti Taqi Usmani's list of companies whose shares cannot be acquired at all is the starting point: those "providing financial services on interest, like conventional banks, insurance companies", and those "manufacturing, selling or offering liquors, pork, haram meat, or involved in gambling, night club activities, pornography". No ratio rescues a company that fails here, as the seven gate run learned when a casino operator cleared all seven of its gates.

Second, the three AAOIFI ratios with the divisor written down in advance: interest bearing debt at or below 30 percent of market capitalisation, interest taking deposits and securities at or below 30 percent, prohibited income at or below 5 percent of total income. The AAOIFI explainer covers where the numbers come from; the stock screener applies them to listed companies from current filings with the reasoning shown, and the crypto screener carries the framework across to digital assets, where there is no balance sheet to divide by.

Third, purification of whatever the ratios tolerate, calculated and paid.

Only then the quality filters, which is where Halal Ninja's article belongs. Keep the margin trend. Keep the quick ratio as a survival test if you want one, knowing that it pulls toward cash and that cash is the liquidity condition's problem rather than its solution. Replace Debt / Equity with the AAOIFI ratio, because the article's reason for the filter was a Sharia reason and the filter does not deliver it. Read the total debt field before trusting it, since the leases inside it are ijarah, not riba. Reading the survivors line by line is the subject of the author's next post and of our DuPont analysis of it.

Halal Ninja's screening article promised three reasons to exclude a company and delivered filters for two of them. The one it called "not halal" got no filter, only a sentence inside the justification for a debt ratio that measures leverage against book equity, a divisor no Sharia standard uses. Run on real filings, that ratio throws out Apple at 123 percent while AAOIFI passes it at 1.9 percent, and admits Rocky Brands at 48.7 percent while AAOIFI refuses it at 37.3. The quick ratio hunts for the cash rich balance sheet Utah Medical has, which passes the filter at 34.6, fails the deposits ceiling at 38.0 percent, and is roughly three quarters liquid by the measure Mufti Taqi Usmani uses to decide whether a share can be traded at all. None of this makes the article useless. It makes it a quality screen wearing a halal label, and the label is the part a Muslim reader came for.

This article is Sharia analysis for educational purposes, not investment advice and not a personal fatwa. The companies named are worked examples from their filings, not recommendations, and their ratios move with every price and every quarter. Consult a qualified scholar for rulings specific to your circumstances.

Is a Debt to Equity filter a Sharia screen? No. AAOIFI's debt test, as summarised by Mufti Faraz Adam, divides interest bearing debt by market capitalisation, not by book equity. The two divisors can differ by more than an order of magnitude, and Apple, at 123 percent Debt / Equity and 1.9 percent Debt / Market capitalisation, fails the first and passes the second with room.

Why does Halal Ninja's screen reject Apple? Twice over. Apple's term debt of 90.678 billion dollars is 123 percent of its 73.733 billion of book equity, far above the article's 50 percent ceiling, and its quick ratio of 0.86 is below the article's floor of 1. Neither number is an AAOIFI number, and on AAOIFI's ratios Apple passes.

Can a company pass the 50 percent Debt to Equity filter and still fail AAOIFI? Yes. Rocky Brands carried 122.642 million dollars of SOFR based borrowings against 252.088 million of book equity, 48.7 percent, and passed the filter. Against its market capitalisation of 328.67 million on 3 September 2026 the same debt is 37.3 percent, above AAOIFI's 30 percent ceiling.

Does a screener's Total Debt field include leases? Commonly, yes. Since IFRS 16 and ASC 842, lease liabilities sit on the balance sheet, and the Eastern Company example shows a data feed counting bank borrowings plus finance and operating lease liabilities as one debt figure. A lease is an ijarah obligation under AAOIFI Shari'ah Standard No. 9, not interest bearing debt, so the field overstates riba exposure. On Eastern it moved the AAOIFI ratio from 20.5 to 32.5 percent.

Why is a high quick ratio a Sharia concern? Because the assets that raise it are cash and receivables. AAOIFI caps interest taking deposits at 30 percent of market capitalisation, and Mufti Taqi Usmani holds that shares are negotiable only if the company owns some non-liquid assets, since a share in a pile of money can only change hands at par. Utah Medical passes the quick ratio at 34.6 and fails the deposits ceiling at 38.0 percent.

Is excluding Israel and China a Sharia ruling? No. It is a boycott made on grounds of conscience or maslahah, which a Muslim may choose, and it should be kept distinct from haram, which attaches to prohibited contracts and activities. The cost is that compliant companies listed on those exchanges are excluded with the rest.

Did Halal Ninja's stock picking series ever continue? Not under that name. The live page still stops mid sentence in its P/E Ratio section and has an empty Revenue Growth section, and the site's home page lists no further "Stock Picking" post. The author's next two articles, on deep value investing and on analysing companies, are reviewed elsewhere in this series.