Wells Fargo 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 Wells Fargo 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 * 1.0284 | + | 0.528 * 1 | + | 0.404 * 0.8658 | + | 0.892 * 1.0693 | + | 0.115 * 1.029 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.981 | + | 4.679 * -0.00105 | - | 0.327 * 0.7746 |
| = | -2.37 |
* 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 $55,850 Mil.
Revenue was 20863 + 20478 + 20857 + 20533 = $82,731 Mil.
Gross Profit was 20863 + 20478 + 20857 + 20533 = $82,731 Mil.
Total Current Assets was $460,431 Mil.
Total Assets was $1,959,153 Mil.
Property, Plant and Equipment(Net PPE) was $18,385 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,538 Mil.
Selling, General, & Admin. Expense(SGA) was $36,748 Mil.
Total Current Liabilities was $22,528 Mil.
Long-Term Debt & Capital Lease Obligation was $187,764 Mil.
Net Income was 4619 + 3446 + 5767 + 4938 = $18,770 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -12125 + 18202 + 15505 + -755 = $20,827 Mil.
|
Total Receivables was $50,787 Mil.
Revenue was 20729 + 20034 + 19566 + 17040 = $77,369 Mil.
Gross Profit was 20729 + 20034 + 19566 + 17040 = $77,369 Mil.
Total Current Assets was $222,292 Mil.
Total Assets was $1,886,400 Mil.
Property, Plant and Equipment(Net PPE) was $17,831 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,593 Mil.
Selling, General, & Admin. Expense(SGA) was $35,033 Mil.
Total Current Liabilities was $87,953 Mil.
Long-Term Debt & Capital Lease Obligation was $173,466 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) |
| = | (55850 / 82731) | / | (50787 / 77369) |
| = | 0.675079 | / | 0.656426 |
| | = | 1.0284 |
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) |
| = | (77369 / 77369) | / | (82731 / 82731) |
| = | 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 - (460431 + 18385) / 1959153) | / | (1 - (222292 + 17831) / 1886400) |
| = | 0.755601 | / | 0.872708 |
| | = | 0.8658 |
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 |
| = | 82731 | / | 77369 |
| | = | 1.0693 |
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)) |
| = | (6593 / (6593 + 17831)) | / | (6538 / (6538 + 18385)) |
| = | 0.269939 | / | 0.262328 |
| | = | 1.029 |
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) |
| = | (36748 / 82731) | / | (35033 / 77369) |
| = | 0.444187 | / | 0.452804 |
| | = | 0.981 |
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) |
| = | ((187764 + 22528) / 1959153) | / | ((173466 + 87953) / 1886400) |
| = | 0.107338 | / | 0.138581 |
| | = | 0.7746 |
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 |
| = | (18770 - 0 | - | 20827) | / | 1959153 |
| | = | -0.00105 |
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.
Wells Fargo has a M-score of -2.37 suggests that the company is unlikely to be a manipulator.
Quick Browse
Personalize
Premium Gurus 
Create New Portfolio
Portfolio Contest
LTS:0R2F has been successfully added to your