Blackstone 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 Blackstone 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 * 0.516 | + | 0.528 * 1 | + | 0.404 * 0.9991 | + | 0.892 * 1.8595 | + | 0.115 * 1.6912 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.5566 | + | 4.679 * -0.063028 | - | 0.327 * 0.9064 |
| = | -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 (Mar24) TTM: | Last Year (Mar23) TTM: |
Total Receivables was €4,503 Mil.
Revenue was 2804.488 + 1014.019 + 2001.142 + 2273.826 = €8,093 Mil.
Gross Profit was 2804.488 + 1014.019 + 2001.142 + 2273.826 = €8,093 Mil.
Total Current Assets was €0 Mil.
Total Assets was €36,530 Mil.
Property, Plant and Equipment(Net PPE) was €1,233 Mil.
Depreciation, Depletion and Amortization(DDA) was €33 Mil.
Selling, General, & Admin. Expense(SGA) was €1,191 Mil.
Total Current Liabilities was €0 Mil.
Long-Term Debt & Capital Lease Obligation was €10,756 Mil.
Net Income was 779.595 + 139.201 + 517.218 + 554.976 = €1,991 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 864.658 + 821.346 + 1014.69 + 1592.707 = €4,293 Mil.
|
Total Receivables was €4,693 Mil.
Revenue was 1215.734 + 1433.484 + 983.831 + 719.448 = €4,352 Mil.
Gross Profit was 1215.734 + 1433.484 + 983.831 + 719.448 = €4,352 Mil.
Total Current Assets was €0 Mil.
Total Assets was €38,375 Mil.
Property, Plant and Equipment(Net PPE) was €1,263 Mil.
Depreciation, Depletion and Amortization(DDA) was €59 Mil.
Selling, General, & Admin. Expense(SGA) was €1,151 Mil.
Total Current Liabilities was €0 Mil.
Long-Term Debt & Capital Lease Obligation was €12,467 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) |
| = | (4502.964 / 8093.475) | / | (4693.069 / 4352.497) |
| = | 0.55637 | / | 1.078247 |
| | = | 0.516 |
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) |
| = | (4352.497 / 4352.497) | / | (8093.475 / 8093.475) |
| = | 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 + 1232.918) / 36529.798) | / | (1 - (0 + 1263.138) / 38374.734) |
| = | 0.966249 | / | 0.967084 |
| | = | 0.9991 |
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 |
| = | 8093.475 | / | 4352.497 |
| | = | 1.8595 |
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)) |
| = | (58.847 / (58.847 + 1263.138)) | / | (33.329 / (33.329 + 1232.918)) |
| = | 0.044514 | / | 0.026321 |
| | = | 1.6912 |
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) |
| = | (1190.785 / 8093.475) | / | (1150.524 / 4352.497) |
| = | 0.147129 | / | 0.264337 |
| | = | 0.5566 |
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) |
| = | ((10756.473 + 0) / 36529.798) | / | ((12466.883 + 0) / 38374.734) |
| = | 0.294458 | / | 0.324872 |
| | = | 0.9064 |
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 |
| = | (1990.99 - 0 | - | 4293.401) | / | 36529.798 |
| | = | -0.063028 |
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.
Blackstone has a M-score of -2.27 suggests that the company is unlikely to be a manipulator.
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