Bank of Montreal 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 of Montreal 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 * 0.6215 | + | 0.528 * 1 | + | 0.404 * 1.0002 | + | 0.892 * 1.0154 | + | 0.115 * 0.9722 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9271 | + | 4.679 * -0.015736 | - | 0.327 * 1.0605 |
| = | -2.90 |
* 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 (Oct24) TTM: | Last Year (Oct23) TTM: |
Total Receivables was €28,313 Mil.
Revenue was 5550.574 + 5481.98 + 5398.839 + 5230.473 = €21,662 Mil.
Gross Profit was 5550.574 + 5481.98 + 5398.839 + 5230.473 = €21,662 Mil.
Total Current Assets was €0 Mil.
Total Assets was €940,653 Mil.
Property, Plant and Equipment(Net PPE) was €4,215 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,427 Mil.
Selling, General, & Admin. Expense(SGA) was €7,919 Mil.
Total Current Liabilities was €0 Mil.
Long-Term Debt & Capital Lease Obligation was €103,833 Mil.
Net Income was 1535.45 + 1253.85 + 1269.112 + 882.232 = €4,941 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 3140.965 + 1362.091 + 2718.163 + 12521.539 = €19,743 Mil.
|
Total Receivables was €44,862 Mil.
Revenue was 5719.156 + 5513.23 + 5228.241 + 4872.311 = €21,333 Mil.
Gross Profit was 5719.156 + 5513.23 + 5228.241 + 4872.311 = €21,333 Mil.
Total Current Assets was €0 Mil.
Total Assets was €930,291 Mil.
Property, Plant and Equipment(Net PPE) was €4,396 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,434 Mil.
Selling, General, & Admin. Expense(SGA) was €8,412 Mil.
Total Current Liabilities was €0 Mil.
Long-Term Debt & Capital Lease Obligation was €96,826 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) |
| = | (28313.397 / 21661.866) | / | (44861.639 / 21332.938) |
| = | 1.307062 | / | 2.102928 |
| | = | 0.6215 |
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) |
| = | (21332.938 / 21332.938) | / | (21661.866 / 21661.866) |
| = | 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 + 4214.646) / 940652.719) | / | (1 - (0 + 4395.898) / 930290.754) |
| = | 0.995519 | / | 0.995275 |
| | = | 1.0002 |
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 |
| = | 21661.866 | / | 21332.938 |
| | = | 1.0154 |
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)) |
| = | (1433.554 / (1433.554 + 4395.898)) | / | (1426.971 / (1426.971 + 4214.646)) |
| = | 0.245916 | / | 0.252937 |
| | = | 0.9722 |
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) |
| = | (7919.067 / 21661.866) | / | (8411.685 / 21332.938) |
| = | 0.365576 | / | 0.394305 |
| | = | 0.9271 |
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) |
| = | ((103833.36 + 0) / 940652.719) | / | ((96826.468 + 0) / 930290.754) |
| = | 0.110384 | / | 0.104082 |
| | = | 1.0605 |
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 |
| = | (4940.644 - 0 | - | 19742.758) | / | 940652.719 |
| | = | -0.015736 |
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 of Montreal has a M-score of -2.90 suggests that the company is unlikely to be a manipulator.
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