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Capital One Financial (NYSE:COF) Beneish M-Score

: -2.37 (As of Today)
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Note: Financial institutions were excluded from the sample in Beneish paper when calculating Beneish M-Score. Thus, the prediction might not fit banks and insurance companies.

The zones of discrimination for M-Score is as such:

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.

Good Sign:

Beneish M-Score -2.37 no higher than -1.78, which implies that the company is unlikely to be a manipulator.

The historical rank and industry rank for Capital One Financial's Beneish M-Score or its related term are showing as below:

COF' s Beneish M-Score Range Over the Past 10 Years
Min: -2.86   Med: -2.52   Max: -2.09
Current: -2.37

During the past 13 years, the highest Beneish M-Score of Capital One Financial was -2.09. The lowest was -2.86. And the median was -2.52.


Capital One Financial 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 Capital One Financial 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 * 1.2226+0.528 * 1+0.404 * 0.9532+0.892 * 1.0898+0.115 * 1.006
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0062+4.679 * -0.034403-0.327 * 0.9904
=-2.37

* 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 (Sep23) TTM:Last Year (Sep22) TTM:
Total Receivables was $2,469 Mil.
Revenue was 9366 + 9012 + 8903 + 9040 = $36,321 Mil.
Gross Profit was 9366 + 9012 + 8903 + 9040 = $36,321 Mil.
Total Current Assets was $49,491 Mil.
Total Assets was $471,435 Mil.
Property, Plant and Equipment(Net PPE) was $4,378 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,271 Mil.
Selling, General, & Admin. Expense(SGA) was $13,157 Mil.
Total Current Liabilities was $685 Mil.
Long-Term Debt & Capital Lease Obligation was $48,725 Mil.
Net Income was 1790 + 1431 + 960 + 1232 = $5,413 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 7129 + 3354 + 2992 + 8157 = $21,632 Mil.
Total Receivables was $1,853 Mil.
Revenue was 8805 + 8232 + 8173 + 8118 = $33,328 Mil.
Gross Profit was 8805 + 8232 + 8173 + 8118 = $33,328 Mil.
Total Current Assets was $27,161 Mil.
Total Assets was $444,232 Mil.
Property, Plant and Equipment(Net PPE) was $4,265 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,220 Mil.
Selling, General, & Admin. Expense(SGA) was $11,998 Mil.
Total Current Liabilities was $433 Mil.
Long-Term Debt & Capital Lease Obligation was $46,579 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)
=(2469 / 36321) / (1853 / 33328)
=0.067977 / 0.055599
=1.2226

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)
=(33328 / 33328) / (36321 / 36321)
=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 - (49491 + 4378) / 471435) / (1 - (27161 + 4265) / 444232)
=0.885734 / 0.929258
=0.9532

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
=36321 / 33328
=1.0898

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))
=(3220 / (3220 + 4265)) / (3271 / (3271 + 4378))
=0.430194 / 0.427638
=1.006

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)
=(13157 / 36321) / (11998 / 33328)
=0.362242 / 0.359998
=1.0062

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)
=((48725 + 685) / 471435) / ((46579 + 433) / 444232)
=0.104808 / 0.105828
=0.9904

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
=(5413 - 0 - 21632) / 471435
=-0.034403

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.

Capital One Financial has a M-score of -2.37 suggests that the company is unlikely to be a manipulator.


Capital One Financial Beneish M-Score Related Terms

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Capital One Financial (NYSE:COF) Business Description

Address
1680 Capital One Drive, McLean, VA, USA, 22102
Capital One is a diversified financial services holding company headquartered in McLean, Virginia. Originally a spinoff of Signet Financial's credit card division in 1994, the company is now primarily involved in credit card lending, auto loans, and commercial lending.
Executives
Laprade,iii Frank G. officer: Chief Enterprise Srvcs Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Robert M. Alexander officer: Chief Information Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Ann F Hackett director
Richard D Fairbank director, officer: Chairman, CEO and President 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Kara West officer: Chief Audit Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Kevin S. Borgmann officer: Chief Risk Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Mark Daniel Mouadeb officer: President, U.S. Card 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Neal Blinde officer: EC, Commercial Banking 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Timothy P Golden officer: Controller 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Michael Zamsky officer: Chief Consumer Credit Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Ravi Raghu officer: Pres, Software, Intl & Sm Bus 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Sheldon Hall officer: Chief Risk Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Kaitlin Haggerty officer: Chief Human Resources Officer 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102
Peter E Raskind director NATIONAL CITY CORP, 1900 EAST NINTH STREET, CLEVELAND OH 44114-3484
Matthew W Cooper officer: General Counsel 1680 CAPITAL ONE DRIVE, MCLEAN VA 22102