Monmouth Real Estate Investment 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 Monmouth Real Estate Investment 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 * 1.1875 | + | 0.528 * 0.9984 | + | 0.404 * 1 | + | 0.892 * 1.1033 | + | 0.115 * 0.9925 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9904 | + | 4.679 * -0.006058 | - | 0.327 * 1.0947 |
| = | -2.27 |
* 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 (Dec21) TTM: | Last Year (Dec20) TTM: |
Total Receivables was $22.85 Mil.
Revenue was 48.474 + 46.815 + 45.994 + 46.365 = $187.65 Mil.
Gross Profit was 40.756 + 39.718 + 38.904 + 38.722 = $158.10 Mil.
Total Current Assets was $0.00 Mil.
Total Assets was $2,231.33 Mil.
Property, Plant and Equipment(Net PPE) was $6.07 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.28 Mil.
Selling, General, & Admin. Expense(SGA) was $9.77 Mil.
Total Current Liabilities was $0.00 Mil.
Long-Term Debt & Capital Lease Obligation was $1,108.72 Mil.
Net Income was 19.833 + -18.766 + 28.602 + 34.329 = $64.00 Mil.
Non Operating Income was 5.963 + -28.661 + 15.676 + 21.028 = $14.01 Mil.
Cash Flow from Operations was 8.393 + 8.04 + 22.342 + 24.734 = $63.51 Mil.
|
Total Receivables was $17.44 Mil.
Revenue was 43.96 + 42.635 + 41.775 + 41.708 = $170.08 Mil.
Gross Profit was 36.906 + 36.072 + 35.045 + 35.045 = $143.07 Mil.
Total Current Assets was $0.00 Mil.
Total Assets was $2,122.20 Mil.
Property, Plant and Equipment(Net PPE) was $5.83 Mil.
Depreciation, Depletion and Amortization(DDA) was $51.86 Mil.
Selling, General, & Admin. Expense(SGA) was $8.94 Mil.
Total Current Liabilities was $0.00 Mil.
Long-Term Debt & Capital Lease Obligation was $963.25 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) |
| = | (22.85 / 187.648) | / | (17.441 / 170.078) |
| = | 0.121771 | / | 0.102547 |
| | = | 1.1875 |
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) |
| = | (143.068 / 170.078) | / | (158.1 / 187.648) |
| = | 0.841191 | / | 0.842535 |
| | = | 0.9984 |
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 + 6.065) / 2231.33) | / | (1 - (0 + 5.831) / 2122.201) |
| = | 0.997282 | / | 0.997252 |
| | = | 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 |
| = | 187.648 | / | 170.078 |
| | = | 1.1033 |
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)) |
| = | (51.859 / (51.859 + 5.831)) | / | (58.281 / (58.281 + 6.065)) |
| = | 0.898925 | / | 0.905744 |
| | = | 0.9925 |
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) |
| = | (9.769 / 187.648) | / | (8.94 / 170.078) |
| = | 0.05206 | / | 0.052564 |
| | = | 0.9904 |
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) |
| = | ((1108.722 + 0) / 2231.33) | / | ((963.247 + 0) / 2122.201) |
| = | 0.496888 | / | 0.453891 |
| | = | 1.0947 |
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 |
| = | (63.998 - 14.006 | - | 63.509) | / | 2231.33 |
| | = | -0.006058 |
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.
Monmouth Real Estate Investment has a M-score of -2.27 suggests that the company is unlikely to be a manipulator.
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