Great-West Lifeco 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 Great-West Lifeco 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 * 0.5727 | + | 0.528 * 1 | + | 0.404 * 1.0051 | + | 0.892 * 1.0885 | + | 0.115 * 0.9404 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9326 | + | 4.679 * 0.000183 | - | 0.327 * 0.8874 |
| = | -2.75 |
* 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 (Jun23) TTM: | Last Year (Jun22) TTM: |
Total Receivables was $3,578 Mil.
Revenue was 636.008 + 6149.236 + 10373.206 + 9283.305 = $26,442 Mil.
Gross Profit was 636.008 + 6149.236 + 10373.206 + 9283.305 = $26,442 Mil.
Total Current Assets was $18,086 Mil.
Total Assets was $519,346 Mil.
Property, Plant and Equipment(Net PPE) was $797 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General, & Admin. Expense(SGA) was $1,174 Mil.
Total Current Liabilities was $2,157 Mil.
Long-Term Debt & Capital Lease Obligation was $6,925 Mil.
Net Income was 399.669 + 458.233 + 779.536 + 539.771 = $2,177 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 471.925 + -755.682 + 1100.478 + 1265.462 = $2,082 Mil.
|
Total Receivables was $5,740 Mil.
Revenue was -4115.12 + 494.471 + 14159.375 + 13754.242 = $24,293 Mil.
Gross Profit was -4115.12 + 494.471 + 14159.375 + 13754.242 = $24,293 Mil.
Total Current Assets was $20,732 Mil.
Total Assets was $523,512 Mil.
Property, Plant and Equipment(Net PPE) was $880 Mil.
Depreciation, Depletion and Amortization(DDA) was $450 Mil.
Selling, General, & Admin. Expense(SGA) was $1,157 Mil.
Total Current Liabilities was $2,690 Mil.
Long-Term Debt & Capital Lease Obligation was $7,627 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) |
| = | (3578.203 / 26441.755) | / | (5740.394 / 24292.968) |
| = | 0.135324 | / | 0.236299 |
| | = | 0.5727 |
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) |
| = | (24292.968 / 24292.968) | / | (26441.755 / 26441.755) |
| = | 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 - (18085.956 + 797.08) / 519345.928) | / | (1 - (20731.803 + 880.194) / 523512.184) |
| = | 0.963641 | / | 0.958717 |
| | = | 1.0051 |
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 |
| = | 26441.755 | / | 24292.968 |
| | = | 1.0885 |
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)) |
| = | (449.801 / (449.801 + 880.194)) | / | (447.61 / (447.61 + 797.08)) |
| = | 0.338198 | / | 0.359616 |
| | = | 0.9404 |
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) |
| = | (1174.168 / 26441.755) | / | (1156.67 / 24292.968) |
| = | 0.044406 | / | 0.047613 |
| | = | 0.9326 |
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) |
| = | ((6925.335 + 2157.158) / 519345.928) | / | ((7627.304 + 2689.784) / 523512.184) |
| = | 0.017488 | / | 0.019707 |
| | = | 0.8874 |
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 |
| = | (2177.209 - 0 | - | 2082.183) | / | 519345.928 |
| | = | 0.000183 |
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.
Great-West Lifeco has a M-score of -2.75 suggests that the company is unlikely to be a manipulator.
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