American Equity Investment Life Holding Co 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 American Equity Investment Life Holding Co 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 * 1.5509 | + | 0.528 * 1 | + | 0.404 * 1.0301 | + | 0.892 * 0.4398 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 3.0514 | + | 4.679 * -0.051418 | - | 0.327 * 0.9092 |
| = | -3.02 |
* 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 $38 Mil.
Revenue was -43.021 + 723.145 + 632.644 + 266.762 = $1,580 Mil.
Gross Profit was -43.021 + 723.145 + 632.644 + 266.762 = $1,580 Mil.
Total Current Assets was $44,591 Mil.
Total Assets was $79,918 Mil.
Property, Plant and Equipment(Net PPE) was $0 Mil.
Depreciation, Depletion and Amortization(DDA) was $9 Mil.
Selling, General, & Admin. Expense(SGA) was $217 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt & Capital Lease Obligation was $865 Mil.
Net Income was -464.995 + 476.156 + 355.363 + -155.994 = $211 Mil.
Non Operating Income was 112.92 + 99.653 + 88.378 + 78.985 = $380 Mil.
Cash Flow from Operations was 910.207 + -217.889 + 2382.448 + 865.043 = $3,940 Mil.
|
Total Receivables was $55 Mil.
Revenue was 123.253 + 910.856 + 1010.711 + 1546.921 = $3,592 Mil.
Gross Profit was 123.253 + 910.856 + 1010.711 + 1546.921 = $3,592 Mil.
Total Current Assets was $41,780 Mil.
Total Assets was $73,184 Mil.
Property, Plant and Equipment(Net PPE) was $0 Mil.
Depreciation, Depletion and Amortization(DDA) was $14 Mil.
Selling, General, & Admin. Expense(SGA) was $162 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt & Capital Lease Obligation was $871 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) |
| = | (37.854 / 1579.53) | / | (55.498 / 3591.741) |
| = | 0.023965 | / | 0.015452 |
| | = | 1.5509 |
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) |
| = | (3591.741 / 3591.741) | / | (1579.53 / 1579.53) |
| = | 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 - (44590.922 + 0) / 79918.302) | / | (1 - (41779.784 + 0) / 73183.599) |
| = | 0.442044 | / | 0.42911 |
| | = | 1.0301 |
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 |
| = | 1579.53 | / | 3591.741 |
| | = | 0.4398 |
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)) |
| = | (14.185 / (14.185 + 0)) | / | (8.653 / (8.653 + 0)) |
| = | 1 | / | 1 |
| | = | 1 |
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) |
| = | (217.469 / 1579.53) | / | (162.061 / 3591.741) |
| = | 0.13768 | / | 0.04512 |
| | = | 3.0514 |
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) |
| = | ((864.55 + 0) / 79918.302) | / | ((870.826 + 0) / 73183.599) |
| = | 0.010818 | / | 0.011899 |
| | = | 0.9092 |
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 |
| = | (210.53 - 379.936 | - | 3939.809) | / | 79918.302 |
| | = | -0.051418 |
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.
American Equity Investment Life Holding Co has a M-score of -3.02 suggests that the company is unlikely to be a manipulator.
Quick Browse
Personalize
Premium Gurus 
Create New Portfolio
Portfolio Contest
AEL has been successfully added to your