The Goldmanchs Group 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 The Goldmanchs Group 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 * 1.0305 | + | 0.528 * 1 | + | 0.404 * 1.0369 | + | 0.892 * 0.9526 | + | 0.115 * 0.4262 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0358 | + | 4.679 * 0.01303 | - | 0.327 * 0.8485 |
| = | -2.44 |
* 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 €136,245 Mil.
Revenue was 10378.606 + 11072.529 + 10056.085 + 11417.216 = €42,924 Mil.
Gross Profit was 10378.606 + 11072.529 + 10056.085 + 11417.216 = €42,924 Mil.
Total Current Assets was €388,191 Mil.
Total Assets was €1,505,342 Mil.
Property, Plant and Equipment(Net PPE) was €12,302 Mil.
Depreciation, Depletion and Amortization(DDA) was €4,509 Mil.
Selling, General, & Admin. Expense(SGA) was €14,971 Mil.
Total Current Liabilities was €300,099 Mil.
Long-Term Debt & Capital Lease Obligation was €229,341 Mil.
Net Income was 1841.336 + 1928.346 + 1122.368 + 3020.556 = €7,913 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was -26004.286 + -23925.358 + 29444.623 + 8783.336 = €-11,702 Mil.
|
Total Receivables was €138,793 Mil.
Revenue was 9999.792 + 12094.75 + 11223.344 + 11743.164 = €45,061 Mil.
Gross Profit was 9999.792 + 12094.75 + 11223.344 + 11743.164 = €45,061 Mil.
Total Current Assets was €379,518 Mil.
Total Assets was €1,361,058 Mil.
Property, Plant and Equipment(Net PPE) was €18,168 Mil.
Depreciation, Depletion and Amortization(DDA) was €2,345 Mil.
Selling, General, & Admin. Expense(SGA) was €15,172 Mil.
Total Current Liabilities was €322,137 Mil.
Long-Term Debt & Capital Lease Obligation was €242,041 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) |
| = | (136245.109 / 42924.436) | / | (138793.488 / 45061.05) |
| = | 3.174069 | / | 3.080121 |
| | = | 1.0305 |
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) |
| = | (45061.05 / 45061.05) | / | (42924.436 / 42924.436) |
| = | 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 - (388190.859 + 12301.555) / 1505341.698) | / | (1 - (379518.208 + 18168.224) / 1361058.256) |
| = | 0.733952 | / | 0.707811 |
| | = | 1.0369 |
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 |
| = | 42924.436 | / | 45061.05 |
| | = | 0.9526 |
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)) |
| = | (2344.904 / (2344.904 + 18168.224)) | / | (4509.246 / (4509.246 + 12301.555)) |
| = | 0.114312 | / | 0.268235 |
| | = | 0.4262 |
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) |
| = | (14970.9 / 42924.436) | / | (15172.41 / 45061.05) |
| = | 0.348773 | / | 0.336708 |
| | = | 1.0358 |
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) |
| = | ((229340.783 + 300099.254) / 1505341.698) | / | ((242040.656 + 322137.168) / 1361058.256) |
| = | 0.351708 | / | 0.414514 |
| | = | 0.8485 |
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 |
| = | (7912.606 - 0 | - | -11701.685) | / | 1505341.698 |
| | = | 0.01303 |
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.
The Goldmanchs Group has a M-score of -2.44 suggests that the company is unlikely to be a manipulator.
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