The Toronto-Dominion Bank 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 The Toronto-Dominion Bank 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 * 1.1048 | + | 0.528 * 1 | + | 0.404 * 1.0316 | + | 0.892 * 1.1076 | + | 0.115 * 0.9514 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0416 | + | 4.679 * 0.053914 | - | 0.327 * 0.9952 |
| = | -2.03 |
* 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 (Jan24) TTM: | Last Year (Jan23) TTM: |
Total Receivables was $41,587 Mil.
Revenue was 10162.408 + 10765.753 + 9664.673 + 9217.591 = $39,810 Mil.
Gross Profit was 10162.408 + 10765.753 + 9664.673 + 9217.591 = $39,810 Mil.
Total Current Assets was $157,396 Mil.
Total Assets was $1,423,595 Mil.
Property, Plant and Equipment(Net PPE) was $7,095 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,471 Mil.
Selling, General, & Admin. Expense(SGA) was $16,250 Mil.
Total Current Liabilities was $199,263 Mil.
Long-Term Debt & Capital Lease Obligation was $134,706 Mil.
Net Income was 2103.852 + 2104.726 + 2242.828 + 2485.168 = $8,937 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -14983.238 + 10587.806 + -23314.662 + -40104.568 = $-67,815 Mil.
|
Total Receivables was $33,984 Mil.
Revenue was 9674.415 + 8712.105 + 8892.239 + 8664.08 = $35,943 Mil.
Gross Profit was 9674.415 + 8712.105 + 8892.239 + 8664.08 = $35,943 Mil.
Total Current Assets was $198,032 Mil.
Total Assets was $1,436,659 Mil.
Property, Plant and Equipment(Net PPE) was $6,856 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,339 Mil.
Selling, General, & Admin. Expense(SGA) was $14,086 Mil.
Total Current Liabilities was $212,644 Mil.
Long-Term Debt & Capital Lease Obligation was $126,017 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) |
| = | (41586.829 / 39810.425) | / | (33983.758 / 35942.839) |
| = | 1.044622 | / | 0.945495 |
| | = | 1.1048 |
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) |
| = | (35942.839 / 35942.839) | / | (39810.425 / 39810.425) |
| = | 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 - (157396.261 + 7095.284) / 1423595.321) | / | (1 - (198032.335 + 6855.908) / 1436659.216) |
| = | 0.884453 | / | 0.857386 |
| | = | 1.0316 |
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 |
| = | 39810.425 | / | 35942.839 |
| | = | 1.1076 |
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)) |
| = | (1338.597 / (1338.597 + 6855.908)) | / | (1470.722 / (1470.722 + 7095.284)) |
| = | 0.163353 | / | 0.171693 |
| | = | 0.9514 |
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) |
| = | (16250.479 / 39810.425) | / | (14085.712 / 35942.839) |
| = | 0.408197 | / | 0.391892 |
| | = | 1.0416 |
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) |
| = | ((134706.101 + 199263.205) / 1423595.321) | / | ((126016.987 + 212644.167) / 1436659.216) |
| = | 0.234596 | / | 0.235728 |
| | = | 0.9952 |
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 |
| = | (8936.574 - 0 | - | -67814.662) | / | 1423595.321 |
| | = | 0.053914 |
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.
The Toronto-Dominion Bank has a M-score of -2.03 suggests that the company is unlikely to be a manipulator.
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