Bank of Montreal 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 Bank of Montreal 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 * 0.7933 | + | 0.528 * 1 | + | 0.404 * 1.0288 | + | 0.892 * 1.207 | + | 0.115 * 0.8976 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.2355 | + | 4.679 * -0.002182 | - | 0.327 * 0.8455 |
| = | -2.49 |
* 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 (Jan24) TTM: | Last Year (Jan23) TTM: |
Total Receivables was $1,295 Mil.
Revenue was 5697.683 + 6069.137 + 6005.601 + 6215.515 = $23,988 Mil.
Gross Profit was 5697.683 + 6069.137 + 6005.601 + 6215.515 = $23,988 Mil.
Total Current Assets was $111,818 Mil.
Total Assets was $986,934 Mil.
Property, Plant and Equipment(Net PPE) was $4,623 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,669 Mil.
Selling, General, & Admin. Expense(SGA) was $9,980 Mil.
Total Current Liabilities was $76,817 Mil.
Long-Term Debt & Capital Lease Obligation was $104,042 Mil.
Net Income was 961.037 + 1174.154 + 1099.084 + 783.15 = $4,017 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 13640.021 + 2596.266 + 8082.658 + -18148.176 = $6,171 Mil.
|
Total Receivables was $1,352 Mil.
Revenue was 5250.335 + 4737.38 + 5368.738 + 4517.738 = $19,874 Mil.
Gross Profit was 5250.335 + 4737.38 + 5368.738 + 4517.738 = $19,874 Mil.
Total Current Assets was $118,166 Mil.
Total Assets was $853,603 Mil.
Property, Plant and Equipment(Net PPE) was $3,625 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,133 Mil.
Selling, General, & Admin. Expense(SGA) was $6,692 Mil.
Total Current Liabilities was $82,528 Mil.
Long-Term Debt & Capital Lease Obligation was $102,477 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) |
| = | (1294.793 / 23987.936) | / | (1352.257 / 19874.191) |
| = | 0.053977 | / | 0.068041 |
| | = | 0.7933 |
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) |
| = | (19874.191 / 19874.191) | / | (23987.936 / 23987.936) |
| = | 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 - (111817.776 + 4622.663) / 986934.366) | / | (1 - (118165.698 + 3624.646) / 853603.04) |
| = | 0.882018 | / | 0.857322 |
| | = | 1.0288 |
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 |
| = | 23987.936 | / | 19874.191 |
| | = | 1.207 |
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)) |
| = | (1132.539 / (1132.539 + 3624.646)) | / | (1668.582 / (1668.582 + 4622.663)) |
| = | 0.238069 | / | 0.265223 |
| | = | 0.8976 |
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) |
| = | (9979.718 / 23987.936) | / | (6692.111 / 19874.191) |
| = | 0.416031 | / | 0.336724 |
| | = | 1.2355 |
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) |
| = | ((104041.57 + 76816.658) / 986934.366) | / | ((102477.276 + 82527.939) / 853603.04) |
| = | 0.183253 | / | 0.216734 |
| | = | 0.8455 |
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 |
| = | (4017.425 - 0 | - | 6170.769) | / | 986934.366 |
| | = | -0.002182 |
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.
Bank of Montreal has a M-score of -2.49 suggests that the company is unlikely to be a manipulator.
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