SoFi Technologies 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 SoFi Technologies 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 * 0.9979 | + | 0.528 * 1 | + | 0.404 * 0.9585 | + | 0.892 * 1.3014 | + | 0.115 * 0.9122 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8225 | + | 4.679 * 0.233845 | - | 0.327 * 0.6107 |
| = | -0.99 |
* 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 (Dec23) TTM: | Last Year (Dec22) TTM: |
Total Receivables was €156 Mil.
Revenue was 550.961 + 503.365 + 459.671 + 440.996 = €1,955 Mil.
Gross Profit was 550.961 + 503.365 + 459.671 + 440.996 = €1,955 Mil.
Total Current Assets was €3,444 Mil.
Total Assets was €27,579 Mil.
Property, Plant and Equipment(Net PPE) was €281 Mil.
Depreciation, Depletion and Amortization(DDA) was €187 Mil.
Selling, General, & Admin. Expense(SGA) was €1,141 Mil.
Total Current Liabilities was €778 Mil.
Long-Term Debt & Capital Lease Obligation was €4,472 Mil.
Net Income was 43.936 + -249.883 + -43.888 + -32.15 = €-282 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was -227.362 + -2517.268 + -1919.765 + -2066.718 = €-6,731 Mil.
|
Total Receivables was €120 Mil.
Revenue was 431.105 + 428.225 + 342.951 + 299.952 = €1,502 Mil.
Gross Profit was 431.105 + 428.225 + 342.951 + 299.952 = €1,502 Mil.
Total Current Assets was €1,499 Mil.
Total Assets was €17,943 Mil.
Property, Plant and Equipment(Net PPE) was €252 Mil.
Depreciation, Depletion and Amortization(DDA) was €145 Mil.
Selling, General, & Admin. Expense(SGA) was €1,066 Mil.
Total Current Liabilities was €733 Mil.
Long-Term Debt & Capital Lease Obligation was €4,860 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) |
| = | (155.754 / 1954.993) | / | (119.935 / 1502.233) |
| = | 0.07967 | / | 0.079838 |
| | = | 0.9979 |
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) |
| = | (1502.233 / 1502.233) | / | (1954.993 / 1954.993) |
| = | 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 - (3444.081 + 281.1) / 27578.645) | / | (1 - (1499.439 + 252.274) / 17943.245) |
| = | 0.864925 | / | 0.902375 |
| | = | 0.9585 |
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 |
| = | 1954.993 | / | 1502.233 |
| | = | 1.3014 |
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)) |
| = | (144.512 / (144.512 + 252.274)) | / | (186.82 / (186.82 + 281.1)) |
| = | 0.364206 | / | 0.399256 |
| | = | 0.9122 |
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) |
| = | (1141.475 / 1954.993) | / | (1066.434 / 1502.233) |
| = | 0.583877 | / | 0.709899 |
| | = | 0.8225 |
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) |
| = | ((4471.872 + 777.776) / 27578.645) | / | ((4860.062 + 733.059) / 17943.245) |
| = | 0.190352 | / | 0.311712 |
| | = | 0.6107 |
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 |
| = | (-281.985 - 0 | - | -6731.113) | / | 27578.645 |
| | = | 0.233845 |
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.
SoFi Technologies has a M-score of -0.99 signals that the company is likely to be a manipulator.
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