Wells Fargo 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 Wells Fargo 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 * 1.5411 | + | 0.528 * 1 | + | 0.404 * 1.0001 | + | 0.892 * 3.0432 | + | 0.115 * 1.375 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.004 | + | 4.679 * 0.004082 | - | 0.327 * 1.0422 |
| = | -0.11 |
* 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 ARS47,053,626 Mil.
Revenue was 17577077.799 + 7392558.007 + 7298907.351 + 4927919.961 = ARS37,196,463 Mil.
Gross Profit was 17577077.799 + 7392558.007 + 7298907.351 + 4927919.961 = ARS37,196,463 Mil.
Total Current Assets was ARS0 Mil.
Total Assets was ARS1,650,586,431 Mil.
Property, Plant and Equipment(Net PPE) was ARS15,489,363 Mil.
Depreciation, Depletion and Amortization(DDA) was ARS3,021,432 Mil.
Selling, General, & Admin. Expense(SGA) was ARS16,825,273 Mil.
Total Current Liabilities was ARS0 Mil.
Long-Term Debt & Capital Lease Obligation was ARS158,191,173 Mil.
Net Income was 3891507.566 + 1244006.001 + 2018161.706 + 1185119.991 = ARS8,338,795 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = ARS0 Mil.
Cash Flow from Operations was -10215312.674 + 6570922.006 + 5425974.899 + -181199.999 = ARS1,600,384 Mil.
|
Total Receivables was ARS10,032,972 Mil.
Revenue was 4095014.045 + 3358700.007 + 2718695.66 + 2050423.228 = ARS12,222,833 Mil.
Gross Profit was 4095014.045 + 3358700.007 + 2718695.66 + 2050423.228 = ARS12,222,833 Mil.
Total Current Assets was ARS0 Mil.
Total Assets was ARS372,658,329 Mil.
Property, Plant and Equipment(Net PPE) was ARS3,522,514 Mil.
Depreciation, Depletion and Amortization(DDA) was ARS1,019,367 Mil.
Selling, General, & Admin. Expense(SGA) was ARS5,506,993 Mil.
Total Current Liabilities was ARS0 Mil.
Long-Term Debt & Capital Lease Obligation was ARS34,268,209 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) |
| = | (47053625.8 / 37196463.118) | / | (10032972.084 / 12222832.94) |
| = | 1.265003 | / | 0.820839 |
| | = | 1.5411 |
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) |
| = | (12222832.94 / 12222832.94) | / | (37196463.118 / 37196463.118) |
| = | 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 + 15489362.763) / 1650586430.56) | / | (1 - (0 + 3522514.132) / 372658328.674) |
| = | 0.990616 | / | 0.990548 |
| | = | 1.0001 |
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 |
| = | 37196463.118 | / | 12222832.94 |
| | = | 3.0432 |
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)) |
| = | (1019367.21 / (1019367.21 + 3522514.132)) | / | (3021431.688 / (3021431.688 + 15489362.763)) |
| = | 0.224437 | / | 0.163225 |
| | = | 1.375 |
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) |
| = | (16825273.014 / 37196463.118) | / | (5506992.774 / 12222832.94) |
| = | 0.452335 | / | 0.45055 |
| | = | 1.004 |
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) |
| = | ((158191172.689 + 0) / 1650586430.56) | / | ((34268209.098 + 0) / 372658328.674) |
| = | 0.095839 | / | 0.091956 |
| | = | 1.0422 |
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 |
| = | (8338795.264 - 0 | - | 1600384.232) | / | 1650586430.56 |
| | = | 0.004082 |
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.
Wells Fargo has a M-score of -0.11 signals that the company is likely to be a manipulator.
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