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 * 1.5905 | + | 0.528 * 1 | + | 0.404 * 0.9518 | + | 0.892 * 0.9775 | + | 0.115 * 0.8776 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9084 | + | 4.679 * -0.074582 | - | 0.327 * 0.9393 |
| = | -2.30 |
* 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 €8,637 Mil.
Revenue was 3092.124 + 2538.333 + 2790.229 + 2257.478 = €10,678 Mil.
Gross Profit was 3092.124 + 2538.333 + 2790.229 + 2257.478 = €10,678 Mil.
Total Current Assets was €32,990 Mil.
Total Assets was €73,923 Mil.
Property, Plant and Equipment(Net PPE) was €473 Mil.
Depreciation, Depletion and Amortization(DDA) was €550 Mil.
Selling, General, & Admin. Expense(SGA) was €2,697 Mil.
Total Current Liabilities was €1,069 Mil.
Long-Term Debt & Capital Lease Obligation was €3,926 Mil.
Net Income was -63.273 + 399.162 + 202.137 + -55.106 = €483 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 2075.171 + 1008.212 + 1588.483 + 1324.412 = €5,996 Mil.
|
Total Receivables was €5,555 Mil.
Revenue was 2419.472 + 3293.61 + 2437.842 + 2773.032 = €10,924 Mil.
Gross Profit was 2419.472 + 3293.61 + 2437.842 + 2773.032 = €10,924 Mil.
Total Current Assets was €25,610 Mil.
Total Assets was €61,495 Mil.
Property, Plant and Equipment(Net PPE) was €524 Mil.
Depreciation, Depletion and Amortization(DDA) was €468 Mil.
Selling, General, & Admin. Expense(SGA) was €3,038 Mil.
Total Current Liabilities was €972 Mil.
Long-Term Debt & Capital Lease Obligation was €3,451 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) |
| = | (8637.223 / 10678.164) | / | (5555.44 / 10923.956) |
| = | 0.808868 | / | 0.508556 |
| | = | 1.5905 |
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) |
| = | (10923.956 / 10923.956) | / | (10678.164 / 10678.164) |
| = | 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 - (32989.992 + 473.172) / 73923.038) | / | (1 - (25609.776 + 523.92) / 61494.992) |
| = | 0.547324 | / | 0.575027 |
| | = | 0.9518 |
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 |
| = | 10678.164 | / | 10923.956 |
| | = | 0.9775 |
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)) |
| = | (467.92 / (467.92 + 523.92)) | / | (550.025 / (550.025 + 473.172)) |
| = | 0.47177 | / | 0.537555 |
| | = | 0.8776 |
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) |
| = | (2697.355 / 10678.164) | / | (3037.834 / 10923.956) |
| = | 0.252605 | / | 0.278089 |
| | = | 0.9084 |
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) |
| = | ((3925.677 + 1069.222) / 73923.038) | / | ((3451.264 + 972.32) / 61494.992) |
| = | 0.067569 | / | 0.071934 |
| | = | 0.9393 |
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 |
| = | (482.92 - 0 | - | 5996.278) | / | 73923.038 |
| | = | -0.074582 |
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 -2.30 suggests that the company is unlikely to be a manipulator.
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