Citigroup Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Citigroup for today is based on a combination of the following eight different indices:
| M | = | -4.84 | + | 0.92 * DSRI | + | 0.528 * GMI | + | 0.404 * AQI | + | 0.892 * SGI | + | 0.115 * DEPI |
| = | -4.84 | + | 0.92 * 1.0746 | + | 0.528 * 1 | + | 0.404 * 0.999 | + | 0.892 * 0.9813 | + | 0.115 * 1.0323 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0229 | + | 4.679 * 0.024817 | - | 0.327 * 1.0303 |
| = | -2.32 |
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
| This Year (Mar24) TTM: | Last Year (Mar23) TTM: |
Total Receivables was R$306,696 Mil.
Revenue was 105043.901 + 92312.232 + 97519.57 + 94355.928 = R$389,232 Mil.
Gross Profit was 105043.901 + 92312.232 + 97519.57 + 94355.928 = R$389,232 Mil.
Total Current Assets was R$0 Mil.
Total Assets was R$12,113,413 Mil.
Property, Plant and Equipment(Net PPE) was R$145,350 Mil.
Depreciation, Depletion and Amortization(DDA) was R$22,419 Mil.
Selling, General, & Admin. Expense(SGA) was R$151,233 Mil.
Total Current Liabilities was R$0 Mil.
Long-Term Debt & Capital Lease Obligation was R$1,421,708 Mil.
Net Income was 16786.906 + -9010.732 + 17512.63 + 14148.536 = R$39,437 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = R$0 Mil.
Cash Flow from Operations was -53936.214 + -22862.467 + 78001.828 + -262386.168 = R$-261,183 Mil.
|
Total Receivables was R$290,843 Mil.
Revenue was 106281.483 + 97805.728 + 93776.542 + 98783.489 = R$396,647 Mil.
Gross Profit was 106281.483 + 97805.728 + 93776.542 + 98783.489 = R$396,647 Mil.
Total Current Assets was R$0 Mil.
Total Assets was R$12,787,702 Mil.
Property, Plant and Equipment(Net PPE) was R$141,252 Mil.
Depreciation, Depletion and Amortization(DDA) was R$22,604 Mil.
Selling, General, & Admin. Expense(SGA) was R$150,657 Mil.
Total Current Liabilities was R$0 Mil.
Long-Term Debt & Capital Lease Obligation was R$1,456,762 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Total Receivables in year t to year t-1.
A large increase in DSR could be indicative of revenue inflation.
| DSRI | = | (Receivables_t / Revenue_t) | / | (Receivables_t-1 / Revenue_t-1) |
| = | (306695.922 / 389231.631) | / | (290843.015 / 396647.242) |
| = | 0.787952 | / | 0.733254 |
| | = | 1.0746 |
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
| GMI | = | GrossMargin_t-1 | / | GrossMargin_t |
| = | (GrossProfit_t-1 / Revenue_t-1) | / | (GrossProfit_t / Revenue_t) |
| = | (396647.242 / 396647.242) | / | (389231.631 / 389231.631) |
| = | 1 | / | 1 |
| | = | 1 |
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
Asset quality is measured as the ratio of non-current assets other than Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (0 + 145350.402) / 12113413.296) | / | (1 - (0 + 141252.023) / 12787701.572) |
| = | 0.988001 | / | 0.988954 |
| | = | 0.999 |
4. SGI = Sales Growth Index
Ratio of Revenue in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
| SGI | = | Sales_t | / | Sales_t-1 |
| = | Revenue_t | / | Revenue_t-1 |
| = | 389231.631 | / | 396647.242 |
| | = | 0.9813 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
| DEPI | = | (Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) | / | (Depreciation_t / (Depreciaton_t + PPE_t)) |
| = | (22604.322 / (22604.322 + 141252.023)) | / | (22419.004 / (22419.004 + 145350.402)) |
| = | 0.137952 | / | 0.13363 |
| | = | 1.0323 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
| SGAI | = | (SGA_t / Sales_t) | / | (SGA_t-1 /Sales_t-1) |
| = | (151232.885 / 389231.631) | / | (150657.324 / 396647.242) |
| = | 0.388542 | / | 0.379827 |
| | = | 1.0229 |
7. LVGI = Leverage Index
The ratio of total debt to Total Assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((1421708.001 + 0) / 12113413.296) | / | ((1456762.082 + 0) / 12787701.572) |
| = | 0.117366 | / | 0.113919 |
| | = | 1.0303 |
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
| TATA | = | (IncomefromContinuingOperations_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
| = | (NetIncome_t - NonOperatingIncome_t | - | CashFlowsfromOperations_t) | / | TotalAssets_t |
| = | (39437.34 - 0 | - | -261183.021) | / | 12113413.296 |
| | = | 0.024817 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Citigroup has a M-score of -2.32 suggests that the company is unlikely to be a manipulator.
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