Charles Schwab 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 Charles Schwab 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 * 1.2971 | + | 0.528 * 1 | + | 0.404 * 1.0007 | + | 0.892 * 0.934 | + | 0.115 * 0.9269 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9883 | + | 4.679 * -0.057036 | - | 0.327 * 0.9226 |
| = | -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 (Sep24) TTM: | Last Year (Sep23) TTM: |
Total Receivables was MXN1,457,397 Mil.
Revenue was 95438.884 + 85921.283 + 78666.249 + 75688.172 = MXN335,715 Mil.
Gross Profit was 95438.884 + 85921.283 + 78666.249 + 75688.172 = MXN335,715 Mil.
Total Current Assets was MXN0 Mil.
Total Assets was MXN9,176,763 Mil.
Property, Plant and Equipment(Net PPE) was MXN65,766 Mil.
Depreciation, Depletion and Amortization(DDA) was MXN25,928 Mil.
Selling, General, & Admin. Expense(SGA) was MXN113,149 Mil.
Total Current Liabilities was MXN0 Mil.
Long-Term Debt & Capital Lease Obligation was MXN441,890 Mil.
Net Income was 27723.942 + 24402.377 + 22604.099 + 17738.089 = MXN92,469 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = MXN0 Mil.
Cash Flow from Operations was 376045.35 + -77897.078 + -22388.348 + 340113.007 = MXN615,873 Mil.
|
Total Receivables was MXN1,202,984 Mil.
Revenue was 80231.44 + 79821.998 + 92215.9 + 107169.512 = MXN359,439 Mil.
Gross Profit was 80231.44 + 79821.998 + 92215.9 + 107169.512 = MXN359,439 Mil.
Total Current Assets was MXN0 Mil.
Total Assets was MXN8,277,530 Mil.
Property, Plant and Equipment(Net PPE) was MXN64,972 Mil.
Depreciation, Depletion and Amortization(DDA) was MXN23,079 Mil.
Selling, General, & Admin. Expense(SGA) was MXN122,575 Mil.
Total Current Liabilities was MXN0 Mil.
Long-Term Debt & Capital Lease Obligation was MXN432,041 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) |
| = | (1457397.246 / 335714.588) | / | (1202983.865 / 359438.85) |
| = | 4.341179 | / | 3.346839 |
| | = | 1.2971 |
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) |
| = | (359438.85 / 359438.85) | / | (335714.588 / 335714.588) |
| = | 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 + 65765.602) / 9176762.773) | / | (1 - (0 + 64972.486) / 8277529.531) |
| = | 0.992833 | / | 0.992151 |
| | = | 1.0007 |
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 |
| = | 335714.588 | / | 359438.85 |
| | = | 0.934 |
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)) |
| = | (23078.813 / (23078.813 + 64972.486)) | / | (25928.057 / (25928.057 + 65765.602)) |
| = | 0.262106 | / | 0.282768 |
| | = | 0.9269 |
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) |
| = | (113149.305 / 335714.588) | / | (122574.765 / 359438.85) |
| = | 0.33704 | / | 0.341017 |
| | = | 0.9883 |
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) |
| = | ((441889.713 + 0) / 9176762.773) | / | ((432040.902 + 0) / 8277529.531) |
| = | 0.048153 | / | 0.052194 |
| | = | 0.9226 |
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 |
| = | (92468.507 - 0 | - | 615872.931) | / | 9176762.773 |
| | = | -0.057036 |
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.
Charles Schwab has a M-score of -2.51 suggests that the company is unlikely to be a manipulator.
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