Berkshire Hathaway 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 Berkshire Hathaway 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 * 1.1954 | + | 0.528 * 1 | + | 0.404 * 1.004 | + | 0.892 * 3.5914 | + | 0.115 * 1.3911 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8063 | + | 4.679 * -0.121661 | - | 0.327 * 0.9271 |
| = | -0.45 |
* 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 ARS44,513,488 Mil.
Revenue was 77295163.814 + 46998590.042 + 22198029.012 + 30135359.759 = ARS176,627,143 Mil.
Gross Profit was 77295163.814 + 46998590.042 + 22198029.012 + 30135359.759 = ARS176,627,143 Mil.
Total Current Assets was ARS0 Mil.
Total Assets was ARS901,504,503 Mil.
Property, Plant and Equipment(Net PPE) was ARS183,243,753 Mil.
Depreciation, Depletion and Amortization(DDA) was ARS5,664,989 Mil.
Selling, General, & Admin. Expense(SGA) was ARS12,375,232 Mil.
Total Current Liabilities was ARS0 Mil.
Long-Term Debt & Capital Lease Obligation was ARS101,180,882 Mil.
Net Income was 10701435.182 + 13564214.012 + -4467811.773 + 8618879.931 = ARS28,416,717 Mil.
Non Operating Income was 53095193.403 + 23901810.022 + 23244029.59 + 15985439.872 = ARS116,226,473 Mil.
Cash Flow from Operations was 8901855.151 + 5198400.005 + 4783466.682 + 2984159.976 = ARS21,867,882 Mil.
|
Total Receivables was ARS10,369,005 Mil.
Revenue was 23735830.602 + 15513492.321 + 8814848.919 + 1116903.075 = ARS49,181,075 Mil.
Gross Profit was 23735830.602 + 15513492.321 + 8814848.919 + 1116903.075 = ARS49,181,075 Mil.
Total Current Assets was ARS0 Mil.
Total Assets was ARS196,971,578 Mil.
Property, Plant and Equipment(Net PPE) was ARS40,666,656 Mil.
Depreciation, Depletion and Amortization(DDA) was ARS1,770,254 Mil.
Selling, General, & Admin. Expense(SGA) was ARS4,273,518 Mil.
Total Current Liabilities was ARS0 Mil.
Long-Term Debt & Capital Lease Obligation was ARS23,844,483 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) |
| = | (44513488.257 / 176627142.627) | / | (10369004.641 / 49181074.917) |
| = | 0.25202 | / | 0.210833 |
| | = | 1.1954 |
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) |
| = | (49181074.917 / 49181074.917) | / | (176627142.627 / 176627142.627) |
| = | 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 + 183243753.115) / 901504502.826) | / | (1 - (0 + 40666656.197) / 196971578.185) |
| = | 0.796736 | / | 0.79354 |
| | = | 1.004 |
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 |
| = | 176627142.627 | / | 49181074.917 |
| | = | 3.5914 |
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)) |
| = | (1770253.649 / (1770253.649 + 40666656.197)) | / | (5664988.571 / (5664988.571 + 183243753.115)) |
| = | 0.041715 | / | 0.029988 |
| | = | 1.3911 |
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) |
| = | (12375231.698 / 176627142.627) | / | (4273518.49 / 49181074.917) |
| = | 0.070064 | / | 0.086894 |
| | = | 0.8063 |
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) |
| = | ((101180881.72 + 0) / 901504502.826) | / | ((23844483.105 + 0) / 196971578.185) |
| = | 0.112236 | / | 0.121055 |
| | = | 0.9271 |
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 |
| = | (28416717.352 - 116226472.887 | - | 21867881.814) | / | 901504502.826 |
| | = | -0.121661 |
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.
Berkshire Hathaway has a M-score of -0.45 signals that the company is likely to be a manipulator.
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