1st Constitution 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 1st Constitution 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 * 0.6759 | + | 0.528 * 1 | + | 0.404 * 0.7961 | + | 0.892 * 1.1388 | + | 0.115 * 0.9617 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9544 | + | 4.679 * -0.033968 | - | 0.327 * 0.4606 |
| = | -2.72 |
* 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 $4.38 Mil.
Revenue was 18.711 + 18.175 + 19.356 + 20.718 = $76.96 Mil.
Gross Profit was 18.711 + 18.175 + 19.356 + 20.718 = $76.96 Mil.
Total Current Assets was $534.11 Mil.
Total Assets was $1,910.54 Mil.
Property, Plant and Equipment(Net PPE) was $29.12 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.92 Mil.
Selling, General, & Admin. Expense(SGA) was $31.45 Mil.
Total Current Liabilities was $37.28 Mil.
Long-Term Debt & Capital Lease Obligation was $34.77 Mil.
Net Income was 5.43 + 5.152 + 4.929 + 6.065 = $21.58 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 30.503 + 10.108 + 26.789 + 19.073 = $86.47 Mil.
|
Total Receivables was $5.69 Mil.
Revenue was 20.088 + 16.948 + 15.392 + 15.154 = $67.58 Mil.
Gross Profit was 20.088 + 16.948 + 15.392 + 15.154 = $67.58 Mil.
Total Current Assets was $179.23 Mil.
Total Assets was $1,844.03 Mil.
Property, Plant and Equipment(Net PPE) was $31.41 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.99 Mil.
Selling, General, & Admin. Expense(SGA) was $28.94 Mil.
Total Current Liabilities was $114.72 Mil.
Long-Term Debt & Capital Lease Obligation was $36.27 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) |
| = | (4.379 / 76.96) | / | (5.689 / 67.582) |
| = | 0.0569 | / | 0.084179 |
| | = | 0.6759 |
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) |
| = | (67.582 / 67.582) | / | (76.96 / 76.96) |
| = | 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 - (534.105 + 29.117) / 1910.54) | / | (1 - (179.226 + 31.413) / 1844.03) |
| = | 0.705203 | / | 0.885772 |
| | = | 0.7961 |
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 |
| = | 76.96 | / | 67.582 |
| | = | 1.1388 |
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)) |
| = | (1.985 / (1.985 + 31.413)) | / | (1.918 / (1.918 + 29.117)) |
| = | 0.059435 | / | 0.061801 |
| | = | 0.9617 |
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) |
| = | (31.454 / 76.96) | / | (28.94 / 67.582) |
| = | 0.408706 | / | 0.428221 |
| | = | 0.9544 |
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) |
| = | ((34.773 + 37.283) / 1910.54) | / | ((36.271 + 114.719) / 1844.03) |
| = | 0.037715 | / | 0.08188 |
| | = | 0.4606 |
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 |
| = | (21.576 - 0 | - | 86.473) | / | 1910.54 |
| | = | -0.033968 |
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.
1st Constitution Bancorp has a M-score of -2.72 suggests that the company is unlikely to be a manipulator.
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