C&F Financial 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 C&F Financial 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 * 1.2409 | + | 0.528 * 1 | + | 0.404 * 1.001 | + | 0.892 * 0.9496 | + | 0.115 * 1.0667 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.1185 | + | 4.679 * -0.007785 | - | 0.327 * 1.6711 |
| = | -2.57 |
* 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 €9.7 Mil.
Revenue was 28.029 + 29.47 + 28.307 + 29.337 = €115.1 Mil.
Gross Profit was 28.029 + 29.47 + 28.307 + 29.337 = €115.1 Mil.
Total Current Assets was €0.0 Mil.
Total Assets was €2,272.2 Mil.
Property, Plant and Equipment(Net PPE) was €38.2 Mil.
Depreciation, Depletion and Amortization(DDA) was €3.5 Mil.
Selling, General, & Admin. Expense(SGA) was €53.7 Mil.
Total Current Liabilities was €0.0 Mil.
Long-Term Debt & Capital Lease Obligation was €86.3 Mil.
Net Income was 3.129 + 4.647 + 5.424 + 5.82 = €19.0 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0.0 Mil.
Cash Flow from Operations was 0.823 + 15.565 + 21.217 + -0.897 = €36.7 Mil.
|
Total Receivables was €8.3 Mil.
Revenue was 30.203 + 34.353 + 30.406 + 26.294 = €121.3 Mil.
Gross Profit was 30.203 + 34.353 + 30.406 + 26.294 = €121.3 Mil.
Total Current Assets was €0.0 Mil.
Total Assets was €2,279.3 Mil.
Property, Plant and Equipment(Net PPE) was €40.6 Mil.
Depreciation, Depletion and Amortization(DDA) was €4.0 Mil.
Selling, General, & Admin. Expense(SGA) was €50.5 Mil.
Total Current Liabilities was €0.0 Mil.
Long-Term Debt & Capital Lease Obligation was €51.8 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) |
| = | (9.747 / 115.143) | / | (8.272 / 121.256) |
| = | 0.084651 | / | 0.068219 |
| | = | 1.2409 |
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) |
| = | (121.256 / 121.256) | / | (115.143 / 115.143) |
| = | 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 + 38.225) / 2272.171) | / | (1 - (0 + 40.637) / 2279.271) |
| = | 0.983177 | / | 0.982171 |
| | = | 1.001 |
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 |
| = | 115.143 | / | 121.256 |
| | = | 0.9496 |
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)) |
| = | (4.037 / (4.037 + 40.637)) | / | (3.538 / (3.538 + 38.225)) |
| = | 0.090366 | / | 0.084716 |
| | = | 1.0667 |
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) |
| = | (53.657 / 115.143) | / | (50.518 / 121.256) |
| = | 0.466003 | / | 0.416623 |
| | = | 1.1185 |
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) |
| = | ((86.268 + 0) / 2272.171) | / | ((51.785 + 0) / 2279.271) |
| = | 0.037967 | / | 0.02272 |
| | = | 1.6711 |
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 |
| = | (19.02 - 0 | - | 36.708) | / | 2272.171 |
| | = | -0.007785 |
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.
C&F Financial has a M-score of -2.57 suggests that the company is unlikely to be a manipulator.
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