 In this module, we shall attempt to provide a comparison of different methodologies for stock picking in a Sharia compliant way and our focus is on financial screening methodologies. We are not focusing on the business screen. This screen is very simple. The activities which are prohibited in Islam like gambling, like interest based activities, like unethical activities like pornography and so on. These are not considered fit for Sharia compliant investing. So all the companies which are involved in these activities, they would be excluded from the universe of Sharia compliant stocks. In this module, we shall be comparing the financial screens as employed by different players in the market. We have already covered these screens but it is important for better understanding of the issues that I compare them in one screen. So Securities Commission of Malaysia as we discussed earlier has two ratios in its financial screen. Total debt divided by total assets should not exceed 33%. Cash divided by total assets should not exceed 33%. So remember, Securities Commission of Malaysia, its financial screening methodology for stock picking is actually total asset based i.e. the ratios they are denominated by total assets. So we call it total assets or TA based approach. S&P Dow Jones Sharia Indices, they use financial screening methodology which on the other hand side is market cap based. So total debt divided by market capitalization of the company of which share we are considering should not exceed 33%. Cash plus interest bearing securities divided by market capitalization should not exceed 33%. And accounts receivables divided by market cap should not exceed 49%. So this is the methodology of S&P Dow Jones Sharia Indices. We would come to the income side in a minute. So as we can see that this is a market cap denominated approach, MSCI Islamic index methodology that is again total assets based like Securities Commission of Malaysia. So total debt divided by total assets should not exceed 33.33%. So apparently MSCI is more pedantic than Securities Commission Malaysia and S&P Dow Jones Sharia indexes where they just say 33%. So the emphasis is on the precise figure 33.33. That is speaking if this methodology is or these methodologies if they are strictly observed if a stock has debt equity ratio of 33.1% according to Securities Commission Malaysia that stock would not be Sharia compliant. However MSCI Islamic index would allow that stock because still the total debt divided by total assets ratio is less than 33.33%. Cash plus interest bearing securities divided by total assets should be less than 33.33% as well in case of MSCI Islamic index methodology. Accounts receivables plus cash divided by total assets should not exceed 33.33%. So here we have a dissimilarity between MSCI approach and Securities Commission Malaysia approach. There in the second screen they use only cash in case of MSCI they use receivables as well as cash in the numerator so this is a difference between the two. Fourth one MSCI Islamic index M series methodology this is like Dow Jones S&P Dow Jones approach it is a market cap approach and the threshold is 33.33% slight difference from S&P Dow Jones threshold. Cash plus interest bearing securities divided by average market cap should not exceed 33.33%. Accounts receivables plus cash. Here MSCI is using cash here S&P Dow Jones they do not include cash in the numerator and of course this should remain less than this should not exceed 49%. So there are minor differences between MSCI Islamic index M series and S&P Dow Jones Sharia indices methodology. This is average kind of thing. Average is actually taken whenever market cap approach is considered average is used as a norm. In stable kind of environments it could be a six month trailing average market capitalization in very volatile conditions this can go up to one year two years. In fact in during the great financial crisis Dow Jones even started using three years average trailing market capitalization as denominator to ensure that its ratios remain stable. Food see Sharia global equity index it is a total assets denominated approach total that divided by total assets should remain less than should not exceed 33.33% they should remain equal to or less than 33.33%. Cash plus interest bearing securities divided by total assets should be less than or equal to 33.33% and accounts receivables plus cash divided by total assets should be less than or equal to 50%. So slight variation in case of food see. So these are small or short small insignificant seemingly insignificant variations in the threshold levels of these ratios. When it comes to income we have already mentioned previously as well S&P Dow Jones non permissible income other than interest income divided by total revenue should not exceed 5% and food see they have total interest and non permissible income divided by total revenue should not exceed 5%. Other methodologies MSCI and securities commission they do not give a precise formula and then of course we discussed the dividend purification formulae previously as well securities commission does not give any guidelines however there are guidelines given by other index providers or other developers of methodologies for stock picking with slight variations in the formulas. We previously said that food see sharea global equity index methodology is the simplest one they say as long as you have picked up a sharea compliant stock i.e. at the time of picking up the stock its impermissible income was less than 5% at the time of dividend purification you should be giving away 5% of the income coming from dividends to a charity.