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 * 1.0348 | + | 0.528 * 1 | + | 0.404 * 1.0369 | + | 0.892 * 0.9765 | + | 0.115 * 0.4257 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0348 | + | 4.679 * 0.012855 | - | 0.327 * 0.8485 |
| = | -2.42 |
* 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 $148,577 Mil.
Revenue was 11318 + 11817 + 10895 + 12224 = $46,254 Mil.
Gross Profit was 11318 + 11817 + 10895 + 12224 = $46,254 Mil.
Total Current Assets was $423,327 Mil.
Total Assets was $1,641,594 Mil.
Property, Plant and Equipment(Net PPE) was $13,415 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,856 Mil.
Selling, General, & Admin. Expense(SGA) was $16,128 Mil.
Total Current Liabilities was $327,262 Mil.
Long-Term Debt & Capital Lease Obligation was $250,099 Mil.
Net Income was 2008 + 2058 + 1216 + 3234 = $8,516 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -28358 + -25534 + 31901 + 9404 = $-12,587 Mil.
|
Total Receivables was $147,027 Mil.
Revenue was 10593 + 11975 + 11864 + 12933 = $47,365 Mil.
Gross Profit was 10593 + 11975 + 11864 + 12933 = $47,365 Mil.
Total Current Assets was $402,032 Mil.
Total Assets was $1,441,799 Mil.
Property, Plant and Equipment(Net PPE) was $19,246 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,455 Mil.
Selling, General, & Admin. Expense(SGA) was $15,960 Mil.
Total Current Liabilities was $341,247 Mil.
Long-Term Debt & Capital Lease Obligation was $256,399 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) |
| = | (148577 / 46254) | / | (147027 / 47365) |
| = | 3.212198 | / | 3.104128 |
| | = | 1.0348 |
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) |
| = | (47365 / 47365) | / | (46254 / 46254) |
| = | 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 - (423327 + 13415) / 1641594) | / | (1 - (402032 + 19246) / 1441799) |
| = | 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 |
| = | 46254 | / | 47365 |
| | = | 0.9765 |
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)) |
| = | (2455 / (2455 + 19246)) | / | (4856 / (4856 + 13415)) |
| = | 0.113128 | / | 0.265776 |
| | = | 0.4257 |
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) |
| = | (16128 / 46254) | / | (15960 / 47365) |
| = | 0.348683 | / | 0.336958 |
| | = | 1.0348 |
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) |
| = | ((250099 + 327262) / 1641594) | / | ((256399 + 341247) / 1441799) |
| = | 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 |
| = | (8516 - 0 | - | -12587) | / | 1641594 |
| | = | 0.012855 |
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 -2.42 suggests that the company is unlikely to be a manipulator.
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