Stage A — the activity screen
A company fails immediately if its core business derives material revenue from conventional (interest-based) banking or insurance, alcohol, tobacco, gambling, pork, adult entertainment, weapons manufacturing, or conventional payment networks. This is a hard gate — no ratio can rescue a business whose activity is itself impermissible.
Stage B — the financial ratios
For a business that passes Stage A, three ratios are checked, each against the company’s market cap: interest-bearing debt ÷ market cap must stay under 30%; cash plus interest-bearing securities ÷ market cap under 30%; and non-permissible (impure) income ÷ total revenue under 5%.
Why market cap as the denominator?
AAOIFI measures these ratios against market capitalization rather than total assets. It’s the more conservative, widely-used basis and it’s what Rizvest screens against — locked as a versioned constant so a verdict is reproducible and auditable.
Borderline is a real state
A company that passes but sits within a few points of a limit is flagged “borderline.” It’s compliant today, but a change in debt or price could push it over — worth watching, and a reason to keep an eye on the alerts.