Century Bancorp 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 Century Bancorp 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 * 0.8958 | + | 0.528 * 1 | + | 0.404 * 1.0219 | + | 0.892 * 1.1323 | + | 0.115 * -1.1739 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9647 | + | 4.679 * -0.000405 | - | 0.327 * 0.6896 |
| = | -2.59 |
* 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 (Sep21) TTM: | Last Year (Sep20) TTM: |
Total Receivables was $13.4 Mil.
Revenue was 34.552 + 34.097 + 32.77 + 33.347 = $134.8 Mil.
Gross Profit was 34.552 + 34.097 + 32.77 + 33.347 = $134.8 Mil.
Total Current Assets was $315.3 Mil.
Total Assets was $7,129.6 Mil.
Property, Plant and Equipment(Net PPE) was $42.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.0 Mil.
Selling, General, & Admin. Expense(SGA) was $60.7 Mil.
Total Current Liabilities was $0.0 Mil.
Long-Term Debt & Capital Lease Obligation was $154.9 Mil.
Net Income was 11.732 + 10.823 + 10.77 + 11.6 = $44.9 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 14.607 + 12.473 + 15.211 + 5.522 = $47.8 Mil.
|
Total Receivables was $13.2 Mil.
Revenue was 31.5 + 29.859 + 29.511 + 28.145 = $119.0 Mil.
Gross Profit was 31.5 + 29.859 + 29.511 + 28.145 = $119.0 Mil.
Total Current Assets was $406.5 Mil.
Total Assets was $6,295.4 Mil.
Property, Plant and Equipment(Net PPE) was $37.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $-1.9 Mil.
Selling, General, & Admin. Expense(SGA) was $55.5 Mil.
Total Current Liabilities was $10.0 Mil.
Long-Term Debt & Capital Lease Obligation was $188.3 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) |
| = | (13.413 / 134.766) | / | (13.223 / 119.015) |
| = | 0.099528 | / | 0.111104 |
| | = | 0.8958 |
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) |
| = | (119.015 / 119.015) | / | (134.766 / 134.766) |
| = | 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 - (315.338 + 42.222) / 7129.562) | / | (1 - (406.534 + 37.34) / 6295.426) |
| = | 0.949848 | / | 0.929493 |
| | = | 1.0219 |
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 |
| = | 134.766 | / | 119.015 |
| | = | 1.1323 |
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)) |
| = | (-1.856 / (-1.856 + 37.34)) | / | (1.969 / (1.969 + 42.222)) |
| = | -0.052305 | / | 0.044557 |
| | = | -1.1739 |
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) |
| = | (60.675 / 134.766) | / | (55.543 / 119.015) |
| = | 0.450225 | / | 0.466689 |
| | = | 0.9647 |
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) |
| = | ((154.869 + 0) / 7129.562) | / | ((188.331 + 9.977) / 6295.426) |
| = | 0.021722 | / | 0.0315 |
| | = | 0.6896 |
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 |
| = | (44.925 - 0 | - | 47.813) | / | 7129.562 |
| | = | -0.000405 |
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.
Century Bancorp has a M-score of -2.59 suggests that the company is unlikely to be a manipulator.
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