State Street 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 State Street 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 * 1.3041 | + | 0.528 * 1 | + | 0.404 * 1.2596 | + | 0.892 * 0.9603 | + | 0.115 * 1.3384 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0685 | + | 4.679 * 0.004482 | - | 0.327 * 1.2702 |
| = | -2.17 |
* 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 €5,268 Mil.
Revenue was 2790.431 + 2521.467 + 2870.53 + 2896.334 = €11,079 Mil.
Gross Profit was 2790.431 + 2521.467 + 2870.53 + 2896.334 = €11,079 Mil.
Total Current Assets was €101,108 Mil.
Total Assets was €272,586 Mil.
Property, Plant and Equipment(Net PPE) was €2,938 Mil.
Depreciation, Depletion and Amortization(DDA) was €819 Mil.
Selling, General, & Admin. Expense(SGA) was €4,365 Mil.
Total Current Liabilities was €31,138 Mil.
Long-Term Debt & Capital Lease Obligation was €14,367 Mil.
Net Income was 192.57 + 395.414 + 704.249 + 512.766 = €1,805 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 3834.894 + 208.014 + -786.396 + -2673.108 = €583 Mil.
|
Total Receivables was €4,206 Mil.
Revenue was 2956.608 + 2988.59 + 2793.538 + 2797.548 = €11,536 Mil.
Gross Profit was 2956.608 + 2988.59 + 2793.538 + 2797.548 = €11,536 Mil.
Total Current Assets was €142,223 Mil.
Total Assets was €284,569 Mil.
Property, Plant and Equipment(Net PPE) was €2,657 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,094 Mil.
Selling, General, & Admin. Expense(SGA) was €4,254 Mil.
Total Current Liabilities was €25,281 Mil.
Long-Term Debt & Capital Lease Obligation was €12,118 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) |
| = | (5268.165 / 11078.762) | / | (4206.464 / 11536.284) |
| = | 0.475519 | / | 0.364629 |
| | = | 1.3041 |
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) |
| = | (11536.284 / 11536.284) | / | (11078.762 / 11078.762) |
| = | 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 - (101107.503 + 2938.068) / 272585.586) | / | (1 - (142223.04 + 2657.36) / 284568.8) |
| = | 0.618301 | / | 0.490877 |
| | = | 1.2596 |
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 |
| = | 11078.762 | / | 11536.284 |
| | = | 0.9603 |
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)) |
| = | (1094.148 / (1094.148 + 2657.36)) | / | (818.603 / (818.603 + 2938.068)) |
| = | 0.291656 | / | 0.217906 |
| | = | 1.3384 |
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) |
| = | (4365.241 / 11078.762) | / | (4254.008 / 11536.284) |
| = | 0.394019 | / | 0.36875 |
| | = | 1.0685 |
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) |
| = | ((14366.639 + 31137.652) / 272585.586) | / | ((12118.128 + 25281.264) / 284568.8) |
| = | 0.166936 | / | 0.131425 |
| | = | 1.2702 |
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 |
| = | (1804.999 - 0 | - | 583.404) | / | 272585.586 |
| | = | 0.004482 |
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.
State Street has a M-score of -2.17 suggests that the company is unlikely to be a manipulator.
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