Citigroup 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 Citigroup 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 * 0.9245 | + | 0.528 * 1 | + | 0.404 * 1.0407 | + | 0.892 * 0.9976 | + | 0.115 * 1.0063 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0272 | + | 4.679 * 0.036055 | - | 0.327 * 1.0012 |
| = | -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 (Dec23) TTM: | Last Year (Dec22) TTM: |
Total Receivables was CHF46,864 Mil.
Revenue was 16292.832 + 17763.502 + 17503.776 + 19864.932 = CHF71,425 Mil.
Gross Profit was 16292.832 + 17763.502 + 17503.776 + 19864.932 = CHF71,425 Mil.
Total Current Assets was CHF484,452 Mil.
Total Assets was CHF2,085,754 Mil.
Property, Plant and Equipment(Net PPE) was CHF24,860 Mil.
Depreciation, Depletion and Amortization(DDA) was CHF4,091 Mil.
Selling, General, & Admin. Expense(SGA) was CHF27,586 Mil.
Total Current Liabilities was CHF87,341 Mil.
Long-Term Debt & Capital Lease Obligation was CHF247,868 Mil.
Net Income was -1590.367 + 3189.982 + 2624.666 + 4262.853 = CHF8,487 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = CHF0 Mil.
Cash Flow from Operations was -4035.157 + 14208.282 + -48674.724 + -28213.868 = CHF-66,715 Mil.
|
Total Receivables was CHF50,815 Mil.
Revenue was 17370.614 + 17406.497 + 18986.814 + 17833.327 = CHF71,597 Mil.
Gross Profit was 17370.614 + 17406.497 + 18986.814 + 17833.327 = CHF71,597 Mil.
Total Current Assets was CHF591,861 Mil.
Total Assets was CHF2,251,375 Mil.
Property, Plant and Equipment(Net PPE) was CHF24,457 Mil.
Depreciation, Depletion and Amortization(DDA) was CHF4,054 Mil.
Selling, General, & Admin. Expense(SGA) was CHF26,919 Mil.
Total Current Liabilities was CHF108,358 Mil.
Long-Term Debt & Capital Lease Obligation was CHF253,028 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) |
| = | (46863.512 / 71425.042) | / | (50815.054 / 71597.252) |
| = | 0.656122 | / | 0.709735 |
| | = | 0.9245 |
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) |
| = | (71597.252 / 71597.252) | / | (71425.042 / 71425.042) |
| = | 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 - (484452.312 + 24860.406) / 2085754.043) | / | (1 - (591861.318 + 24457.295) / 2251375.362) |
| = | 0.755814 | / | 0.726248 |
| | = | 1.0407 |
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 |
| = | 71425.042 | / | 71597.252 |
| | = | 0.9976 |
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)) |
| = | (4054.114 / (4054.114 + 24457.295)) | / | (4091.075 / (4091.075 + 24860.406)) |
| = | 0.142193 | / | 0.141308 |
| | = | 1.0063 |
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) |
| = | (27585.706 / 71425.042) | / | (26919.12 / 71597.252) |
| = | 0.386219 | / | 0.37598 |
| | = | 1.0272 |
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) |
| = | ((247868.111 + 87341.341) / 2085754.043) | / | ((253028.15 + 108358.123) / 2251375.362) |
| = | 0.160714 | / | 0.160518 |
| | = | 1.0012 |
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 |
| = | (8487.134 - 0 | - | -66715.467) | / | 2085754.043 |
| | = | 0.036055 |
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.
Citigroup has a M-score of -2.37 suggests that the company is unlikely to be a manipulator.
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