 We shall continue with our discussion on investing in shares of listed companies and in this context we already started looking into some basic principles of investing in stocks and shares. In the previous module, we had a reference to different methodologies adopted by a number of players in Islamic banking and finance and outside it to invest or to pick up shares and stock of listed companies. These companies, they come from the West as well as from the Muslim world. There were a number of methodologies we listed at the end of the last module. We said S&P, Dow Jones methodology. We referred to FTSE methodology. We referred to MSCI methodology. We referred to a methodology used by Securities Commission Malaysia and of course there was a reference to a methodology adopted by Pakistan Stock Exchange. And at the end, we said that there are guidelines issued by AOFE, Accounting and Auditing Organization for Islamic Financial Institutions, to invest in stock and shares. In this module, given that we have a very short period of time available, we would be picking up two of these methodologies to exemplify what is there in those methodologies. Remember we said there are two types of screens used by the players to pick up stock for stock picking in a Sharia compliant way. One is a business screen, the other one is a financial screen. Business screen is applied before the financial screen. The objective of business screen is to make sure that the company is involved in halal activity. When we are referring to these methodologies over here by Dow Jones, by MSCI and so on, we are referring to the second screen called financial screen. Now number one, in case of S&P Dow Jones financial screening methodology, number one screen is interest bearing debt divided by market capitalization of the company should be less than or equal to 33%. So this is screen number one under financial screen. Number two, cash plus interest bearing security is divided by market capitalization of the company should not exceed 33%. Number three, accounts receivable divided by market capitalization of the company should not exceed 49% or should be less than or equal to it should not exceed 49%. So these are three screens 33%, 33%, 49%. What does this mean? Mote alfaz me ye hai, debt equity ratio should not exceed one third, 33% roughly. Cash held by the company plus interest bearing investments of this company divided by the equity, the market capitalization of the company should not be more than one third. And accounts receivable, what are accounts receivable? Debt owed to the company should not be more than 49% of the market capitalization. So this is a very simple sharia screening methodology on the financial side. When it comes to income, non permissible income other than interest divided by total revenue should be less than or equal to 5%. So if we find this company is listed on the stock exchange, it's a very good company from investment viewpoint, it fulfills all the three screens criteria. However, we find that the income generated by this company from non halal sources is 20%. We would not deem this as a sharia compliant company for a company or a stock to be deemed as sharia compliant, its non permissible income should be less than 5% of the total. So this is called income screen. Let's go to MSCI Islamic index methodology. All these methodologies they seem similar, there are some minor differences between them or amongst them. In case of MSCI Islamic methodology and by the way MSCI has got two methodologies, we'll see the other one. Total debt divided by total assets should be less than or equal to 33.33%. Remember in case of Dow Jones, S&P Dow Jones methodology, the denominator in the ratios was market capitalization. In this case, it says total debt divided by total assets should not exceed one third. Second one says cash plus interest bearing securities divided by again total assets should be less than or equal to which means should not exceed 33.33%. In this case, it's a receivable plus cash. So there is a slight difference between the this one and the S&P Dow Jones divided by total assets should be less than or equal to 33%. So this methodology is asset total assets based. As you call it, this methodology is actually total assets denominated and there are differences. Some people say it's 33%, 33.33% and then we have this one, the last one, 33.33%. In case of S&P Dow Jones, this is 49% or they're more or less the same. They look more or less the same, but when you apply these screens to actual stock, you will get sometimes completely different results. Now MSCI Islamic Index methodology, there is another one, it's called MCDs. MSCI found out that quite a number of their clients would actually ask for S&P Dow Jones methodology to be used by them. So they found out that quite a number of their clients, quite a number of their Islamic fund manager clients, they would have subscription to their methodology as well as the methodology of S&P Dow Jones. So they would be paying to MSCI for the services rendered from it and of course they will have to go to S&P Dow Jones to buy their license for using the data related with that methodology. So MCDs actually came up with a methodology which is quite similar to the methodology of S&P Dow Jones. So here total debt divided by average market capitalization should be less than or equal to 33.33%. So the difference, minor difference in this case is it's 33.33%. There in case of Dow Jones and S&P, this was 33%. Cash plus interest-pairing securities divided by average market cap should be less than or equal to 33.33%. Receivables plus cash, this is a difference from S&P Dow Jones as well, there they use only receivable. So receivables plus cash divided by market capitalization should be less than or equal to 49%. So out of five, six methodologies we listed at the end of the last module, we have picked up two or two and a half if we consider MCDs are separate one as well. Methodologies to let you know what is the focus of these financial screen. So a stock would be deemed Sharia compliant if it fulfills business screen criteria i.e. the company is not involved in a haram activity as its principal primary business and if in general debt-acuity ratio doesn't exceed 33%, cash plus interest-pairing securities divided by market cap shouldn't exceed 33% and if receivables as percentage of market cap should not be the majority i.e. it should not exceed 49%. These screens would or the numbers would remain more or less the same whether the methodology is denominated by market capitalization or by total assets.