Can some1 help me understand if this means the company is making money from interest or what do it mean?

[riverstears]

So I want to understand balance sheets and company financials so I can know if they are in debt, if they getting money from interest etc...

Lets use this company as an example: https://finance.yahoo.com/quote/AITX/

If I go to financials > income statement > and search with quarterly

I see their interest is in the negative

Net Interest Income

-4,043 -1,076 -1,180 -529.484 -1,258 -825.504

So their most recent quarter they have net interest income of -4,045 does that mean they are getting less interest or what does the negative number mean?

I know if we are looking at something like revenue and we see its negative it means they are losing money. Also why talking about revenue here is their total revenue

119.7

Side question:

I am new to the stockmarket, but yahoo says "All numbers in thousands"

So is 119.7 like they made a profit of $119? Or what is that number do I add 3 zeros to it and becomes 119.7,000 doesn't make sense haha sorry if I am being dumb!

Just to be sure what about a number like 8,728 is that like $8,728? Thanks!

Kind of going off topic now back to main question

TLDR​

If interest income is in the negative what does that mean to a company? They are not getting money from interest and its haram?

 

[sbmor777]

@riverstears I would highly, highly recommend not getting financial information or ratios (like debt to assets) from these websites like yahoo finance, wall street journal, etc that just aggregate data and try to present it in a basic/standardized way.

This is because their aggregation is imperfect and especially not helpful for halal screening. As an example, see the below comment about Gamestop and how someone was trying to say GME isn't halal because of the debt ratios on wsj. That ratio included lease liability in debt, which shouldn't be included in halal screening because it's not interest-bearing debt.

https://www.reddit.com/r/MuslimLounge/comments/lbef0u/_/glvevbl

What would be much better and would give you much more detailed information is going to the company's annual reports.

https://www.sec.gov/Archives/edgar/data/1498148/000116169720000345/form_10-k.htm

The negative net interest income you're seeing simply means they have more interest expense than interest income but that doesn't necessarily mean they didn't have interest income.

Looking at the income statement on page F-5, they don't list interest income and checking the notes on other income (pg 19), it looks like they didn't have any interest income.

If you are doing halal stock screening, this company will certainly fail because they are highly leveraged. Just the notes and loans payable (interest-bearing debt) alone are over $7 million while the total assets are only $344k (pg. F-4).

As to your question about (in thousands), that means add 3 zeros to the end of every number you see. So $119.7 is actually $119,700 and $8,728 is actually $8,728,000.

Also, if you're thinking about investing in this company I'd do some good due diligence because at the time the financials were published in July 2020, there was going concern (that the company might go under). See the "Explanatory Paragraph - Going Concern" in the auditor's reports on page F-2 and F-3.

 

[riverstears]

@sbmor777 Thank you brother

My only question is if its possible to see Quarterly using this?

Like GME was flagged as non shariah compliant but really those numbers were not the current quarter, any websites you recommend if I just want to look at quarterly not yearly?

 

[sbmor777]

@riverstears The SEC EDGAR company search has quarterly filings as well. Look for 10-Q for quarterly and 10-K for annual reports. "Q/A" or "K/A" just means amended, so it's the most recent/updated but sometimes it's just small changes that don't affect the financials.

https://www.sec.gov/edgar/searchedgar/companysearch.html

Most companies will also have their annual/quarterly reports on their websites in a place called "investor relations" or something similar.

Also, quarterly filings are not audited and contain less detail than annual filings (you might not get as much detail about interest income or debt arrangements). So I'd start with the latest annual report and then just use quarterly to see if anything jumps out that makes it no longer halal.

GME wasn't Sharia-compliant based on one criteria, the AAOIFI debt as a % of market cap before the market cap exploded. It was halal at least since 2019 using other criteria like FTSE which uses debt as % of total assets.

 

[riverstears]

@sbmor777 That's perfect thanks

So the way I am screening is similar to Zoya/AAOIFI

In that I look at interest income make sure its not more than 5%

Look at interest bearing debt by adding total debt and dividing market cap

Do the same for interest bearing securities.

Any flaw with this method?

Of course their is also the questionable like GME selling games that might have inappropriate things.

 

[sbmor777]

@riverstears No flaws, I just personally prefer not to follow the AAOIFI criteria because there are others that make more sense to me, see the comment linked below.

https://www.reddit.com/r/IslamicFinance/comments/l7iotw/_/gljebj3

As for adding up debt, just make sure you're only adding interest-bearing debt and not including things like accounts payable or leases. A CPA had a good post about it here:

https://www.reddit.com/r/IslamicFinance/comments/l3dog2