Porto Seguro 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 Porto Seguro 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 * 0.7697 | + | 0.528 * 1 | + | 0.404 * 1.0797 | + | 0.892 * 1.2386 | + | 0.115 * 0.5771 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9074 | + | 4.679 * 0.049402 | - | 0.327 * 0.7922 |
| = | -2.18 |
* 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$998 Mil.
Revenue was 5683.795 + 8768.965 + 8148.061 + 7756.45 = R$30,357 Mil.
Gross Profit was 5683.795 + 8768.965 + 8148.061 + 7756.45 = R$30,357 Mil.
Total Current Assets was R$2,103 Mil.
Total Assets was R$44,240 Mil.
Property, Plant and Equipment(Net PPE) was R$1,671 Mil.
Depreciation, Depletion and Amortization(DDA) was R$381 Mil.
Selling, General, & Admin. Expense(SGA) was R$1,850 Mil.
Total Current Liabilities was R$1,952 Mil.
Long-Term Debt & Capital Lease Obligation was R$1,222 Mil.
Net Income was 648.527 + 579.266 + 705.555 + 332.801 = R$2,266 Mil.
Non Operating Income was -2554.026 + 875.766 + 855.18 + 833.93 = R$11 Mil.
Cash Flow from Operations was -2383.082 + 2729.109 + 960.997 + -1237.258 = R$70 Mil.
|
Total Receivables was R$1,047 Mil.
Revenue was 3728.819 + 7759.38 + 6905.169 + 6116.613 = R$24,510 Mil.
Gross Profit was 3728.819 + 7759.38 + 6905.169 + 6116.613 = R$24,510 Mil.
Total Current Assets was R$3,734 Mil.
Total Assets was R$39,914 Mil.
Property, Plant and Equipment(Net PPE) was R$2,366 Mil.
Depreciation, Depletion and Amortization(DDA) was R$284 Mil.
Selling, General, & Admin. Expense(SGA) was R$1,646 Mil.
Total Current Liabilities was R$1,275 Mil.
Long-Term Debt & Capital Lease Obligation was R$2,340 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) |
| = | (997.767 / 30357.271) | / | (1046.612 / 24509.981) |
| = | 0.032867 | / | 0.042701 |
| | = | 0.7697 |
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) |
| = | (24509.981 / 24509.981) | / | (30357.271 / 30357.271) |
| = | 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 - (2103.17 + 1670.853) / 44239.599) | / | (1 - (3733.854 + 2365.612) / 39914.39) |
| = | 0.914691 | / | 0.847186 |
| | = | 1.0797 |
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 |
| = | 30357.271 | / | 24509.981 |
| | = | 1.2386 |
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)) |
| = | (284.251 / (284.251 + 2365.612)) | / | (381.457 / (381.457 + 1670.853)) |
| = | 0.10727 | / | 0.185867 |
| | = | 0.5771 |
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) |
| = | (1849.878 / 30357.271) | / | (1645.897 / 24509.981) |
| = | 0.060937 | / | 0.067152 |
| | = | 0.9074 |
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) |
| = | ((1221.692 + 1951.982) / 44239.599) | / | ((2339.843 + 1274.559) / 39914.39) |
| = | 0.071738 | / | 0.090554 |
| | = | 0.7922 |
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 |
| = | (2266.149 - 10.85 | - | 69.766) | / | 44239.599 |
| | = | 0.049402 |
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.
Porto Seguro has a M-score of -2.18 suggests that the company is unlikely to be a manipulator.
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