Bank Bradesco 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 Bradesco 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 * 1.1042 | + | 0.528 * 1 | + | 0.404 * 1.0366 | + | 0.892 * 0.9027 | + | 0.115 * 0.8688 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0552 | + | 4.679 * 0.007486 | - | 0.327 * 1.1428 |
| = | -2.49 |
* 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 R$25,635 Mil.
Revenue was 23868.858 + 24557.409 + 24516.954 + 25827.301 = R$98,771 Mil.
Gross Profit was 23868.858 + 24557.409 + 24516.954 + 25827.301 = R$98,771 Mil.
Total Current Assets was R$358,300 Mil.
Total Assets was R$1,927,523 Mil.
Property, Plant and Equipment(Net PPE) was R$11,118 Mil.
Depreciation, Depletion and Amortization(DDA) was R$6,520 Mil.
Selling, General, & Admin. Expense(SGA) was R$40,645 Mil.
Total Current Liabilities was R$9,432 Mil.
Long-Term Debt & Capital Lease Obligation was R$359,485 Mil.
Net Income was 1435.139 + 3399.975 + 4016.423 + 5399.792 = R$14,251 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = R$0 Mil.
Cash Flow from Operations was -81008.161 + 79570.194 + -19739.76 + 21000.099 = R$-178 Mil.
|
Total Receivables was R$25,720 Mil.
Revenue was 28938.232 + 24201.715 + 26566.416 + 29715.326 = R$109,422 Mil.
Gross Profit was 28938.232 + 24201.715 + 26566.416 + 29715.326 = R$109,422 Mil.
Total Current Assets was R$384,292 Mil.
Total Assets was R$1,799,616 Mil.
Property, Plant and Equipment(Net PPE) was R$11,971 Mil.
Depreciation, Depletion and Amortization(DDA) was R$5,663 Mil.
Selling, General, & Admin. Expense(SGA) was R$42,672 Mil.
Total Current Liabilities was R$8,683 Mil.
Long-Term Debt & Capital Lease Obligation was R$292,713 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) |
| = | (25635.108 / 98770.522) | / | (25719.835 / 109421.689) |
| = | 0.259542 | / | 0.235052 |
| | = | 1.1042 |
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) |
| = | (109421.689 / 109421.689) | / | (98770.522 / 98770.522) |
| = | 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 - (358299.755 + 11118.009) / 1927523.249) | / | (1 - (384291.969 + 11971.122) / 1799615.675) |
| = | 0.808346 | / | 0.779807 |
| | = | 1.0366 |
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 |
| = | 98770.522 | / | 109421.689 |
| | = | 0.9027 |
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)) |
| = | (5663.22 / (5663.22 + 11971.122)) | / | (6520.116 / (6520.116 + 11118.009)) |
| = | 0.321147 | / | 0.36966 |
| | = | 0.8688 |
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) |
| = | (40645.411 / 98770.522) | / | (42672.038 / 109421.689) |
| = | 0.411514 | / | 0.389978 |
| | = | 1.0552 |
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) |
| = | ((359485.413 + 9431.555) / 1927523.249) | / | ((292713.459 + 8683.314) / 1799615.675) |
| = | 0.191394 | / | 0.167478 |
| | = | 1.1428 |
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 |
| = | (14251.329 - 0 | - | -177.628) | / | 1927523.249 |
| | = | 0.007486 |
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 Bradesco has a M-score of -2.49 suggests that the company is unlikely to be a manipulator.
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