James River Group Holdings 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 James River Group Holdings 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 * 0.8916 | + | 0.528 * 1 | + | 0.404 * 0.8588 | + | 0.892 * 1.2275 | + | 0.115 * -15.2185 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1 | + | 4.679 * -0.038583 | - | 0.327 * 1.006 |
| = | -4.48 |
* 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 $1,766.2 Mil.
Revenue was $812.0 Mil.
Gross Profit was $812.0 Mil.
Total Current Assets was $3,437.1 Mil.
Total Assets was $5,317.3 Mil.
Property, Plant and Equipment(Net PPE) was $17.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $-0.5 Mil.
Selling, General, & Admin. Expense(SGA) was $0.0 Mil.
Total Current Liabilities was $215.4 Mil.
Long-Term Debt & Capital Lease Obligation was $326.4 Mil.
Net Income was $-107.7 Mil.
Gross Profit was $9.5 Mil.
Cash Flow from Operations was $88.0 Mil.
|
Total Receivables was $1,613.8 Mil.
Revenue was $661.5 Mil.
Gross Profit was $661.5 Mil.
Total Current Assets was $3,039.7 Mil.
Total Assets was $5,137.1 Mil.
Property, Plant and Equipment(Net PPE) was $1.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.0 Mil.
Selling, General, & Admin. Expense(SGA) was $0.0 Mil.
Total Current Liabilities was $193.9 Mil.
Long-Term Debt & Capital Lease Obligation was $326.4 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) |
| = | (1766.179 / 812.009) | / | (1613.803 / 661.514) |
| = | 2.175073 | / | 2.43956 |
| | = | 0.8916 |
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) |
| = | (661.514 / 661.514) | / | (812.009 / 812.009) |
| = | 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 - (3437.09 + 16.995) / 5317.25) | / | (1 - (3039.657 + 1.347) / 5137.075) |
| = | 0.3504 | / | 0.408028 |
| | = | 0.8588 |
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 |
| = | 812.009 | / | 661.514 |
| | = | 1.2275 |
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)) |
| = | (1.048 / (1.048 + 1.347)) | / | (-0.475 / (-0.475 + 16.995)) |
| = | 0.437578 | / | -0.028753 |
| | = | -15.2185 |
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) |
| = | (0 / 812.009) | / | (0 / 661.514) |
| = | 0 | / | 0 |
| | = | 1 |
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) |
| = | ((326.355 + 215.392) / 5317.25) | / | ((326.355 + 193.902) / 5137.075) |
| = | 0.101885 | / | 0.101275 |
| | = | 1.006 |
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 |
| = | (-107.684 - 9.517 | - | 87.953) | / | 5317.25 |
| | = | -0.038583 |
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.
James River Group Holdings has a M-score of -4.48 suggests that the company is unlikely to be a manipulator.
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