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 * 14.5315 | + | 0.528 * 1 | + | 0.404 * 1.0003 | + | 0.892 * 1.1174 | + | 0.115 * 0.8304 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0444 | + | 4.679 * -0.02253 | - | 0.327 * 1.0091 |
| = | 9.94 |
* 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 (Apr24) TTM: | Last Year (Apr23) TTM: |
Total Receivables was $25,614 Mil.
Revenue was 5792.745 + 5697.683 + 6069.137 + 6005.601 = $23,565 Mil.
Gross Profit was 5792.745 + 5697.683 + 6069.137 + 6005.601 = $23,565 Mil.
Total Current Assets was $0 Mil.
Total Assets was $1,004,865 Mil.
Property, Plant and Equipment(Net PPE) was $4,579 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,632 Mil.
Selling, General, & Admin. Expense(SGA) was $9,254 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt & Capital Lease Obligation was $104,631 Mil.
Net Income was 1361.708 + 961.037 + 1174.154 + 1099.084 = $4,596 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 2916.484 + 13640.021 + 2596.266 + 8082.658 = $27,235 Mil.
|
Total Receivables was $1,577 Mil.
Revenue was 5732.72 + 5250.335 + 4737.38 + 5368.738 = $21,089 Mil.
Gross Profit was 5732.72 + 5250.335 + 4737.38 + 5368.738 = $21,089 Mil.
Total Current Assets was $0 Mil.
Total Assets was $927,685 Mil.
Property, Plant and Equipment(Net PPE) was $4,532 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,265 Mil.
Selling, General, & Admin. Expense(SGA) was $7,930 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt & Capital Lease Obligation was $95,722 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) |
| = | (25613.573 / 23565.166) | / | (1577.425 / 21089.173) |
| = | 1.086925 | / | 0.074798 |
| | = | 14.5315 |
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) |
| = | (21089.173 / 21089.173) | / | (23565.166 / 23565.166) |
| = | 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 + 4578.763) / 1004865.438) | / | (1 - (0 + 4532.038) / 927685.405) |
| = | 0.995443 | / | 0.995115 |
| | = | 1.0003 |
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 |
| = | 23565.166 | / | 21089.173 |
| | = | 1.1174 |
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)) |
| = | (1264.94 / (1264.94 + 4532.038)) | / | (1632.034 / (1632.034 + 4578.763)) |
| = | 0.218207 | / | 0.262774 |
| | = | 0.8304 |
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) |
| = | (9253.525 / 23565.166) | / | (7929.508 / 21089.173) |
| = | 0.392678 | / | 0.375999 |
| | = | 1.0444 |
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) |
| = | ((104630.686 + 0) / 1004865.438) | / | ((95722.338 + 0) / 927685.405) |
| = | 0.104124 | / | 0.103184 |
| | = | 1.0091 |
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 |
| = | (4595.983 - 0 | - | 27235.429) | / | 1004865.438 |
| | = | -0.02253 |
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 9.94 signals that the company is likely to be a manipulator.
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