The Toronto-Dominion Bank 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 The Toronto-Dominion Bank 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 * 1.1418 | + | 0.528 * 1 | + | 0.404 * 1.0316 | + | 0.892 * 1.0602 | + | 0.115 * 0.9794 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0411 | + | 4.679 * 0.053256 | - | 0.327 * 0.9952 |
| = | -2.04 |
* 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 €38,177 Mil.
Revenue was 9329.09 + 10195.168 + 8736.865 + 8406.443 = €36,668 Mil.
Gross Profit was 9329.09 + 10195.168 + 8736.865 + 8406.443 = €36,668 Mil.
Total Current Assets was €144,490 Mil.
Total Assets was €1,306,861 Mil.
Property, Plant and Equipment(Net PPE) was €6,513 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,353 Mil.
Selling, General, & Admin. Expense(SGA) was €14,956 Mil.
Total Current Liabilities was €182,924 Mil.
Long-Term Debt & Capital Lease Obligation was €123,660 Mil.
Net Income was 1931.336 + 1993.175 + 2027.516 + 2266.473 = €8,219 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was -13754.612 + 10026.653 + -21076.454 + -36575.366 = €-61,380 Mil.
|
Total Receivables was €31,537 Mil.
Revenue was 8977.857 + 8842.786 + 8741.071 + 8022.938 = €34,585 Mil.
Gross Profit was 8977.857 + 8842.786 + 8741.071 + 8022.938 = €34,585 Mil.
Total Current Assets was €183,774 Mil.
Total Assets was €1,333,220 Mil.
Property, Plant and Equipment(Net PPE) was €6,362 Mil.
Depreciation, Depletion and Amortization(DDA) was €1,289 Mil.
Selling, General, & Admin. Expense(SGA) was €13,550 Mil.
Total Current Liabilities was €197,334 Mil.
Long-Term Debt & Capital Lease Obligation was €116,944 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) |
| = | (38176.709 / 36667.566) | / | (31536.927 / 34584.652) |
| = | 1.041157 | / | 0.911876 |
| | = | 1.1418 |
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) |
| = | (34584.652 / 34584.652) | / | (36667.566 / 36667.566) |
| = | 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 - (144489.767 + 6513.471) / 1306860.505) | / | (1 - (183774.006 + 6362.283) / 1333219.753) |
| = | 0.884453 | / | 0.857386 |
| | = | 1.0316 |
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 |
| = | 36667.566 | / | 34584.652 |
| | = | 1.0602 |
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)) |
| = | (1289.232 / (1289.232 + 6362.283)) | / | (1353.414 / (1353.414 + 6513.471)) |
| = | 0.168494 | / | 0.172039 |
| | = | 0.9794 |
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) |
| = | (14956.485 / 36667.566) | / | (13550.01 / 34584.652) |
| = | 0.407894 | / | 0.391793 |
| | = | 1.0411 |
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) |
| = | ((123660.201 + 182923.622) / 1306860.505) | / | ((116943.764 + 197333.787) / 1333219.753) |
| = | 0.234596 | / | 0.235728 |
| | = | 0.9952 |
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 |
| = | (8218.5 - 0 | - | -61379.779) | / | 1306860.505 |
| | = | 0.053256 |
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.
The Toronto-Dominion Bank has a M-score of -2.04 suggests that the company is unlikely to be a manipulator.
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