ArrowMark Financial (FRA:S9O) Beneish M-Score : -1.09 (As of Jun. 06, 2024)

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What is ArrowMark Financial Beneish M-Score?

Note: Financial institutions were excluded from the sample in Beneish paper when calculating Beneish M-Score. Thus, the prediction might not fit banks and insurance companies.

The zones of discrimination for M-Score is as such:

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.

Warning Sign:

Beneish M-Score -1.09 higher than -1.78, which implies that the company might have manipulated its financial results.

The historical rank and industry rank for ArrowMark Financial's Beneish M-Score or its related term are showing as below:

FRA:S9O' s Beneish M-Score Range Over the Past 10 Years
Min: -3.4 Med: -1.74 Max: 1.62
Current: -1.09

During the past 11 years, the highest Beneish M-Score of ArrowMark Financial was 1.62. The lowest was -3.40. And the median was -1.74.

ArrowMark 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 ArrowMark Financial for today is based on a combination of the following eight different indices:

-4.84

0.92 * DSRI

0.528 * GMI

0.404 * AQI

0.892 * SGI

0.115 * DEPI

-4.84

0.92 * 0.5786

0.528 * 1

0.404 * 1

0.892 * 2.8734

0.115 * 1

0.172 * SGAI

4.679 * TATA

0.327 * LVGI

0.172 * 0.4073

4.679 * -0.026709

0.327 * 0.8284

-1.16

* 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 €5.10 Mil.
Revenue was €21.32 Mil.
Gross Profit was €21.32 Mil.
Total Current Assets was €0.00 Mil.
Total Assets was €186.79 Mil.
Property, Plant and Equipment(Net PPE) was €0.00 Mil.
Depreciation, Depletion and Amortization(DDA) was €0.00 Mil.
Selling, General, & Admin. Expense(SGA) was €1.82 Mil.
Total Current Liabilities was €0.00 Mil.
Long-Term Debt & Capital Lease Obligation was €41.27 Mil.
Net Income was €18.57 Mil.
Gross Profit was €0.00 Mil.
Cash Flow from Operations was €23.56 Mil.

Total Receivables was €3.07 Mil.
Revenue was €7.42 Mil.
Gross Profit was €7.42 Mil.
Total Current Assets was €0.00 Mil.
Total Assets was €196.82 Mil.
Property, Plant and Equipment(Net PPE) was €0.00 Mil.
Depreciation, Depletion and Amortization(DDA) was €0.00 Mil.
Selling, General, & Admin. Expense(SGA) was €1.55 Mil.
Total Current Liabilities was €0.00 Mil.
Long-Term Debt & Capital Lease Obligation was €52.49 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)
	=	(5.099 / 21.318)	/	(3.067 / 7.419)
	=	0.239188	/	0.413398
	=	0.5786

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)
	=	(7.419 / 7.419)	/	(21.318 / 21.318)
	=	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 - (0 + 0) / 186.79)	/	(1 - (0 + 0) / 196.824)
	=	1	/	1
	=	1

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
	=	21.318	/	7.419
	=	2.8734

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))
	=	(0 / (0 + 0))	/	(0 / (0 + 0))
	=		/
	=	1

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)
	=	(1.815 / 21.318)	/	(1.551 / 7.419)
	=	0.085139	/	0.209058
	=	0.4073

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)
	=	((41.265 + 0) / 186.79)	/	((52.486 + 0) / 196.824)
	=	0.220917	/	0.266665
	=	0.8284

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
	=	(18.567 - 0	-	23.556)	/	186.79
	=	-0.026709

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.

ArrowMark Financial has a M-score of -1.16 signals that the company is likely to be a manipulator.

ArrowMark Financial Beneish M-Score Related Terms

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ArrowMark Financial (FRA:S9O) Business Description

Industry

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BANX:USA

Address

100 Fillmore Street, Suite 325, Denver, CO, USA, 80206

Website

https://www.stonecastle-financial.com

ArrowMark Financial Corp is a non-diversified, closed-end management investment company. Its objective is to provide stockholders with current income, and to a lesser extent capital appreciation. The company's investment in various portfolios such as debt securities, trust preferred securities, preferred shares of credit securitization, preferred securities, convertible preferred stock, exchange-traded fund, limited partnership interest, and money market fund.