Capital One Financial 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 Capital One Financial 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 * 1.0708 | + | 0.528 * 1 | + | 0.404 * 0.9871 | + | 0.892 * 1.0278 | + | 0.115 * 1.1756 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9861 | + | 4.679 * -0.032114 | - | 0.327 * 1.0132 |
| = | -2.53 |
* 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 €2,313 Mil.
Revenue was 8649.84 + 8717.002 + 8775.942 + 8318.076 = €34,461 Mil.
Gross Profit was 8649.84 + 8717.002 + 8775.942 + 8318.076 = €34,461 Mil.
Total Current Assets was €51,799 Mil.
Total Assets was €443,182 Mil.
Property, Plant and Equipment(Net PPE) was €4,017 Mil.
Depreciation, Depletion and Amortization(DDA) was €2,572 Mil.
Selling, General, & Admin. Expense(SGA) was €12,451 Mil.
Total Current Liabilities was €701 Mil.
Long-Term Debt & Capital Lease Obligation was €45,810 Mil.
Net Income was 1177.6 + 647.402 + 1677.23 + 1320.813 = €4,823 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 2769.2 + 6510.7 + 6679.873 + 3095.742 = €19,056 Mil.
|
Total Receivables was €2,102 Mil.
Revenue was 8315.402 + 8533.76 + 8893.05 + 7787.472 = €33,530 Mil.
Gross Profit was 8315.402 + 8533.76 + 8893.05 + 7787.472 = €33,530 Mil.
Total Current Assets was €46,370 Mil.
Total Assets was €440,530 Mil.
Property, Plant and Equipment(Net PPE) was €4,077 Mil.
Depreciation, Depletion and Amortization(DDA) was €3,457 Mil.
Selling, General, & Admin. Expense(SGA) was €12,286 Mil.
Total Current Liabilities was €580 Mil.
Long-Term Debt & Capital Lease Obligation was €45,051 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) |
| = | (2312.88 / 34460.86) | / | (2101.5 / 33529.684) |
| = | 0.067116 | / | 0.062676 |
| | = | 1.0708 |
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) |
| = | (33529.684 / 33529.684) | / | (34460.86 / 34460.86) |
| = | 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 - (51798.76 + 4016.72) / 443182.4) | / | (1 - (46370.298 + 4076.91) / 440530.44) |
| = | 0.874058 | / | 0.885485 |
| | = | 0.9871 |
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 |
| = | 34460.86 | / | 33529.684 |
| | = | 1.0278 |
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)) |
| = | (3457.33 / (3457.33 + 4076.91)) | / | (2571.585 / (2571.585 + 4016.72)) |
| = | 0.458882 | / | 0.390326 |
| | = | 1.1756 |
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) |
| = | (12451.177 / 34460.86) | / | (12285.516 / 33529.684) |
| = | 0.361314 | / | 0.366407 |
| | = | 0.9861 |
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) |
| = | ((45809.56 + 701.04) / 443182.4) | / | ((45051.49 + 580.014) / 440530.44) |
| = | 0.104947 | / | 0.103583 |
| | = | 1.0132 |
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 |
| = | (4823.045 - 0 | - | 19055.515) | / | 443182.4 |
| | = | -0.032114 |
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.
Capital One Financial has a M-score of -2.53 suggests that the company is unlikely to be a manipulator.
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