JPMorgan Chase 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 JPMorgan Chase 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 * 0.9658 | + | 0.528 * 1 | + | 0.404 * 1.002 | + | 0.892 * 1.1657 | + | 0.115 * 0.9492 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9673 | + | 4.679 * 0.019628 | - | 0.327 * 1.0853 |
| = | -2.30 |
* 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 (Mar24) TTM: | Last Year (Mar23) TTM: |
Total Receivables was $129,823 Mil.
Revenue was 41908 + 38600 + 39761 + 38582 = $158,851 Mil.
Gross Profit was 41908 + 38600 + 39761 + 38582 = $158,851 Mil.
Total Current Assets was $917,285 Mil.
Total Assets was $4,090,727 Mil.
Property, Plant and Equipment(Net PPE) was $30,279 Mil.
Depreciation, Depletion and Amortization(DDA) was $7,867 Mil.
Selling, General, & Admin. Expense(SGA) was $52,861 Mil.
Total Current Liabilities was $383,740 Mil.
Long-Term Debt & Capital Lease Obligation was $395,872 Mil.
Net Income was 13419 + 9307 + 13151 + 14472 = $50,349 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -154158 + 60231 + 45119 + 18865 = $-29,943 Mil.
|
Total Receivables was $115,316 Mil.
Revenue was 38348 + 34512 + 32702 + 30709 = $136,271 Mil.
Gross Profit was 38348 + 34512 + 32702 + 30709 = $136,271 Mil.
Total Current Assets was $844,825 Mil.
Total Assets was $3,744,305 Mil.
Property, Plant and Equipment(Net PPE) was $28,266 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,880 Mil.
Selling, General, & Admin. Expense(SGA) was $46,878 Mil.
Total Current Liabilities was $362,029 Mil.
Long-Term Debt & Capital Lease Obligation was $295,489 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) |
| = | (129823 / 158851) | / | (115316 / 136271) |
| = | 0.817263 | / | 0.846226 |
| | = | 0.9658 |
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) |
| = | (136271 / 136271) | / | (158851 / 158851) |
| = | 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 - (917285 + 30279) / 4090727) | / | (1 - (844825 + 28266) / 3744305) |
| = | 0.768363 | / | 0.766822 |
| | = | 1.002 |
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 |
| = | 158851 | / | 136271 |
| | = | 1.1657 |
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)) |
| = | (6880 / (6880 + 28266)) | / | (7867 / (7867 + 30279)) |
| = | 0.195755 | / | 0.206234 |
| | = | 0.9492 |
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) |
| = | (52861 / 158851) | / | (46878 / 136271) |
| = | 0.332771 | / | 0.344006 |
| | = | 0.9673 |
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) |
| = | ((395872 + 383740) / 4090727) | / | ((295489 + 362029) / 3744305) |
| = | 0.19058 | / | 0.175605 |
| | = | 1.0853 |
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 |
| = | (50349 - 0 | - | -29943) | / | 4090727 |
| | = | 0.019628 |
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.
JPMorgan Chase has a M-score of -2.30 suggests that the company is unlikely to be a manipulator.
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