Assured Guaranty 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 Assured Guaranty 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 * 0.7653 | + | 0.528 * 1 | + | 0.404 * 1.7885 | + | 0.892 * 1.4839 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.6556 | + | 4.679 * 0.017306 | - | 0.327 * 1.3585 |
| = | -1.92 |
* 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 $1,766 Mil.
Revenue was 282 + 146 + 357 + 230 = $1,015 Mil.
Gross Profit was 282 + 146 + 357 + 230 = $1,015 Mil.
Total Current Assets was $9,831 Mil.
Total Assets was $12,539 Mil.
Property, Plant and Equipment(Net PPE) was $366 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $251 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt & Capital Lease Obligation was $1,694 Mil.
Net Income was 376 + 157 + 125 + 81 = $739 Mil.
Non Operating Income was 23 + 6 + 5 + 27 = $61 Mil.
Cash Flow from Operations was 203 + -178 + 124 + 312 = $461 Mil.
|
Total Receivables was $1,555 Mil.
Revenue was 305 + 22 + 77 + 280 = $684 Mil.
Gross Profit was 305 + 22 + 77 + 280 = $684 Mil.
Total Current Assets was $9,591 Mil.
Total Assets was $16,843 Mil.
Property, Plant and Equipment(Net PPE) was $5,493 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $258 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt & Capital Lease Obligation was $1,675 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) |
| = | (1766 / 1015) | / | (1555 / 684) |
| = | 1.739901 | / | 2.273392 |
| | = | 0.7653 |
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) |
| = | (684 / 684) | / | (1015 / 1015) |
| = | 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 - (9831 + 366) / 12539) | / | (1 - (9591 + 5493) / 16843) |
| = | 0.186777 | / | 0.104435 |
| | = | 1.7885 |
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 |
| = | 1015 | / | 684 |
| | = | 1.4839 |
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 + 5493)) | / | (0 / (0 + 366)) |
| = | 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) |
| = | (251 / 1015) | / | (258 / 684) |
| = | 0.247291 | / | 0.377193 |
| | = | 0.6556 |
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) |
| = | ((1694 + 0) / 12539) | / | ((1675 + 0) / 16843) |
| = | 0.135098 | / | 0.099448 |
| | = | 1.3585 |
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 |
| = | (739 - 61 | - | 461) | / | 12539 |
| | = | 0.017306 |
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.
Assured Guaranty has a M-score of -1.92 suggests that the company is unlikely to be a manipulator.
Quick Browse
Personalize
Premium Gurus 
Create New Portfolio
Portfolio Contest
AGO has been successfully added to your