The Travelers 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 The Travelers 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 * 1.3551 | + | 0.528 * 1 | + | 0.404 * 1.0032 | + | 0.892 * 3.2993 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9601 | + | 4.679 * -0.018037 | - | 0.327 * 0.9714 |
| = | -0.17 |
* 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 ARS18,699,288 Mil.
Revenue was 9459590.161 + 3947896.004 + 3721718.353 + 2423519.981 = ARS19,552,724 Mil.
Gross Profit was 9459590.161 + 3947896.004 + 3721718.353 + 2423519.981 = ARS19,552,724 Mil.
Total Current Assets was ARS88,913,239 Mil.
Total Assets was ARS107,342,927 Mil.
Property, Plant and Equipment(Net PPE) was ARS0 Mil.
Depreciation, Depletion and Amortization(DDA) was ARS328,602 Mil.
Selling, General, & Admin. Expense(SGA) was ARS2,422,938 Mil.
Total Current Liabilities was ARS3,599,160 Mil.
Long-Term Debt & Capital Lease Obligation was ARS6,682,710 Mil.
Net Income was 946127.516 + 586986.001 + 141379.804 + -3360 = ARS1,671,133 Mil.
Non Operating Income was 94360.002 + 28158 + 35344.951 + 23760 = ARS181,623 Mil.
Cash Flow from Operations was 1228365.021 + 759544.001 + 1065947.729 + 371759.997 = ARS3,425,617 Mil.
|
Total Receivables was ARS4,182,529 Mil.
Revenue was 1917025.245 + 1615978.305 + 1293902.381 + 1099334.895 = ARS5,926,241 Mil.
Gross Profit was 1917025.245 + 1615978.305 + 1293902.381 + 1099334.895 = ARS5,926,241 Mil.
Total Current Assets was ARS19,378,865 Mil.
Total Assets was ARS23,380,438 Mil.
Property, Plant and Equipment(Net PPE) was ARS0 Mil.
Depreciation, Depletion and Amortization(DDA) was ARS124,015 Mil.
Selling, General, & Admin. Expense(SGA) was ARS764,910 Mil.
Total Current Liabilities was ARS884,629 Mil.
Long-Term Debt & Capital Lease Obligation was ARS1,420,780 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) |
| = | (18699287.818 / 19552724.499) | / | (4182528.697 / 5926240.826) |
| = | 0.956352 | / | 0.705764 |
| | = | 1.3551 |
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) |
| = | (5926240.826 / 5926240.826) | / | (19552724.499 / 19552724.499) |
| = | 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 - (88913239.012 + 0) / 107342926.825) | / | (1 - (19378865.251 + 0) / 23380438.144) |
| = | 0.17169 | / | 0.17115 |
| | = | 1.0032 |
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 |
| = | 19552724.499 | / | 5926240.826 |
| | = | 3.2993 |
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)) |
| = | (124015.3 / (124015.3 + 0)) | / | (328601.555 / (328601.555 + 0)) |
| = | 1 | / | 1 |
| | = | 1 |
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) |
| = | (2422938.43 / 19552724.499) | / | (764909.74 / 5926240.826) |
| = | 0.123918 | / | 0.129072 |
| | = | 0.9601 |
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) |
| = | ((6682710.114 + 3599160.061) / 107342926.825) | / | ((1420779.633 + 884628.92) / 23380438.144) |
| = | 0.095785 | / | 0.098604 |
| | = | 0.9714 |
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 |
| = | (1671133.321 - 181622.953 | - | 3425616.748) | / | 107342926.825 |
| | = | -0.018037 |
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.
The Travelers has a M-score of -0.17 signals that the company is likely to be a manipulator.
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