The Travelers 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 Travelers 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 * 1.0342 | + | 0.528 * 1 | + | 0.404 * 1 | + | 0.892 * 1.2213 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0001 | + | 4.679 * -0.030995 | - | 0.327 * 0.9461 |
| = | -2.38 |
* 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 (Dec24) TTM: | Last Year (Dec23) TTM: |
Total Receivables was MXN464,686 Mil.
Revenue was 250539.524 + 234393.331 + 206705.722 + 186342.751 = MXN877,981 Mil.
Gross Profit was 250539.524 + 234393.331 + 206705.722 + 186342.751 = MXN877,981 Mil.
Total Current Assets was MXN0 Mil.
Total Assets was MXN2,777,750 Mil.
Property, Plant and Equipment(Net PPE) was MXN0 Mil.
Depreciation, Depletion and Amortization(DDA) was MXN13,413 Mil.
Selling, General, & Admin. Expense(SGA) was MXN109,921 Mil.
Total Current Liabilities was MXN0 Mil.
Long-Term Debt & Capital Lease Obligation was MXN165,448 Mil.
Net Income was 43421.567 + 24809.778 + 9782.935 + 18637.594 = MXN96,652 Mil.
Non Operating Income was 2335.838 + 2362.836 + 1923.611 + 1858.781 = MXN8,481 Mil.
Cash Flow from Operations was 43046.165 + 76299.913 + 30722.813 + 24197.34 = MXN174,266 Mil.
|
Total Receivables was MXN367,900 Mil.
Revenue was 185630.376 + 185249.97 + 173119.102 + 174914.6 = MXN718,914 Mil.
Gross Profit was 185630.376 + 185249.97 + 173119.102 + 174914.6 = MXN718,914 Mil.
Total Current Assets was MXN0 Mil.
Total Assets was MXN2,138,382 Mil.
Property, Plant and Equipment(Net PPE) was MXN0 Mil.
Depreciation, Depletion and Amortization(DDA) was MXN12,575 Mil.
Selling, General, & Admin. Expense(SGA) was MXN89,995 Mil.
Total Current Liabilities was MXN0 Mil.
Long-Term Debt & Capital Lease Obligation was MXN134,623 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) |
| = | (464685.851 / 877981.328) | / | (367899.851 / 718914.048) |
| = | 0.529266 | / | 0.511744 |
| | = | 1.0342 |
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) |
| = | (718914.048 / 718914.048) | / | (877981.328 / 877981.328) |
| = | 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 + 0) / 2777749.825) | / | (1 - (0 + 0) / 2138381.813) |
| = | 1 | / | 1 |
| | = | 1 |
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 |
| = | 877981.328 | / | 718914.048 |
| | = | 1.2213 |
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)) |
| = | (12575.274 / (12575.274 + 0)) | / | (13412.716 / (13412.716 + 0)) |
| = | 1 | / | 1 |
| | = | 1 |
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) |
| = | (109921.442 / 877981.328) | / | (89995.295 / 718914.048) |
| = | 0.125198 | / | 0.125182 |
| | = | 1.0001 |
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) |
| = | ((165448.268 + 0) / 2777749.825) | / | ((134622.761 + 0) / 2138381.813) |
| = | 0.059562 | / | 0.062955 |
| | = | 0.9461 |
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 |
| = | (96651.874 - 8481.066 | - | 174266.231) | / | 2777749.825 |
| | = | -0.030995 |
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 Travelers has a M-score of -2.38 suggests that the company is unlikely to be a manipulator.
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