Fidelity National 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 Fidelity National 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 * 1.395 | + | 0.528 * 1 | + | 0.404 * 1.0017 | + | 0.892 * 1.0959 | + | 0.115 * 0.8918 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8535 | + | 4.679 * -0.069072 | - | 0.327 * 0.8581 |
| = | -2.29 |
* 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 €9,695 Mil.
Revenue was 2985.4 + 3092.124 + 2538.333 + 2790.229 = €11,406 Mil.
Gross Profit was 2985.4 + 3092.124 + 2538.333 + 2790.229 = €11,406 Mil.
Total Current Assets was €0 Mil.
Total Assets was €77,736 Mil.
Property, Plant and Equipment(Net PPE) was €474 Mil.
Depreciation, Depletion and Amortization(DDA) was €579 Mil.
Selling, General, & Admin. Expense(SGA) was €2,734 Mil.
Total Current Liabilities was €0 Mil.
Long-Term Debt & Capital Lease Obligation was €3,932 Mil.
Net Income was 228.16 + -63.273 + 399.162 + 202.137 = €766 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 1463.72 + 2075.171 + 1008.212 + 1588.483 = €6,136 Mil.
|
Total Receivables was €6,342 Mil.
Revenue was 2257.478 + 2419.472 + 3293.61 + 2437.842 = €10,408 Mil.
Gross Profit was 2257.478 + 2419.472 + 3293.61 + 2437.842 = €10,408 Mil.
Total Current Assets was €0 Mil.
Total Assets was €65,057 Mil.
Property, Plant and Equipment(Net PPE) was €508 Mil.
Depreciation, Depletion and Amortization(DDA) was €489 Mil.
Selling, General, & Admin. Expense(SGA) was €2,923 Mil.
Total Current Liabilities was €0 Mil.
Long-Term Debt & Capital Lease Obligation was €3,835 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) |
| = | (9694.96 / 11406.086) | / | (6341.86 / 10408.402) |
| = | 0.849981 | / | 0.609302 |
| | = | 1.395 |
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) |
| = | (10408.402 / 10408.402) | / | (11406.086 / 11406.086) |
| = | 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 + 473.8) / 77736.32) | / | (1 - (0 + 508.096) / 65056.836) |
| = | 0.993905 | / | 0.99219 |
| | = | 1.0017 |
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 |
| = | 11406.086 | / | 10408.402 |
| | = | 1.0959 |
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)) |
| = | (488.656 / (488.656 + 508.096)) | / | (578.509 / (578.509 + 473.8)) |
| = | 0.490248 | / | 0.549752 |
| | = | 0.8918 |
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) |
| = | (2733.877 / 11406.086) | / | (2922.868 / 10408.402) |
| = | 0.239686 | / | 0.280818 |
| | = | 0.8535 |
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) |
| = | ((3932.08 + 0) / 77736.32) | / | ((3835.004 + 0) / 65056.836) |
| = | 0.050582 | / | 0.058949 |
| | = | 0.8581 |
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 |
| = | (766.186 - 0 | - | 6135.586) | / | 77736.32 |
| | = | -0.069072 |
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.
Fidelity National Financial has a M-score of -2.29 suggests that the company is unlikely to be a manipulator.
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