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 * 0.8213 | + | 0.528 * 1 | + | 0.404 * 1.0288 | + | 0.892 * 1.1533 | + | 0.115 * 0.921 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.2334 | + | 4.679 * -0.002245 | - | 0.327 * 0.8455 |
| = | -2.51 |
* 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 (Jan24) TTM: | Last Year (Jan23) TTM: |
Total Receivables was €1,189 Mil.
Revenue was 5230.473 + 5747.472 + 5429.064 + 5668.549 = €22,076 Mil.
Gross Profit was 5230.473 + 5747.472 + 5429.064 + 5668.549 = €22,076 Mil.
Total Current Assets was €102,649 Mil.
Total Assets was €906,006 Mil.
Property, Plant and Equipment(Net PPE) was €4,244 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,536 Mil.
Selling, General, & Admin. Expense(SGA) was €9,180 Mil.
Total Current Liabilities was €70,518 Mil.
Long-Term Debt & Capital Lease Obligation was €95,510 Mil.
Net Income was 882.232 + 1111.924 + 993.572 + 714.233 = €3,702 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 12521.539 + 2458.664 + 7306.723 + -16551.136 = €5,736 Mil.
|
Total Receivables was €1,255 Mil.
Revenue was 4872.311 + 4808.441 + 5277.47 + 4183.426 = €19,142 Mil.
Gross Profit was 4872.311 + 4808.441 + 5277.47 + 4183.426 = €19,142 Mil.
Total Current Assets was €109,658 Mil.
Total Assets was €792,144 Mil.
Property, Plant and Equipment(Net PPE) was €3,364 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,090 Mil.
Selling, General, & Admin. Expense(SGA) was €6,453 Mil.
Total Current Liabilities was €76,586 Mil.
Long-Term Debt & Capital Lease Obligation was €95,099 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) |
| = | (1188.62 / 22075.558) | / | (1254.895 / 19141.648) |
| = | 0.053843 | / | 0.065558 |
| | = | 0.8213 |
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) |
| = | (19141.648 / 19141.648) | / | (22075.558 / 22075.558) |
| = | 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 - (102648.718 + 4243.604) / 906005.748) | / | (1 - (109657.768 + 3363.672) / 792143.621) |
| = | 0.882018 | / | 0.857322 |
| | = | 1.0288 |
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 |
| = | 22075.558 | / | 19141.648 |
| | = | 1.1533 |
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)) |
| = | (1090.115 / (1090.115 + 3363.672)) | / | (1535.994 / (1535.994 + 4243.604)) |
| = | 0.244761 | / | 0.265761 |
| | = | 0.921 |
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) |
| = | (9180.017 / 22075.558) | / | (6453.449 / 19141.648) |
| = | 0.415845 | / | 0.337142 |
| | = | 1.2334 |
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) |
| = | ((95510.162 + 70517.692) / 906005.748) | / | ((95098.912 + 76585.927) / 792143.621) |
| = | 0.183253 | / | 0.216734 |
| | = | 0.8455 |
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 |
| = | (3701.961 - 0 | - | 5735.79) | / | 906005.748 |
| | = | -0.002245 |
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 -2.51 suggests that the company is unlikely to be a manipulator.
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