Ames National 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 Ames National 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 * 1.3428 | + | 0.528 * 1 | + | 0.404 * 1.0245 | + | 0.892 * 0.8555 | + | 0.115 * 1.3264 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.2306 | + | 4.679 * -0.003892 | - | 0.327 * 2.7622 |
| = | -2.88 |
* 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 (Dec23) TTM: | Last Year (Dec22) TTM: |
Total Receivables was $12.95 Mil.
Revenue was 13.251 + 13.049 + 13.617 + 13.923 = $53.84 Mil.
Gross Profit was 13.251 + 13.049 + 13.617 + 13.923 = $53.84 Mil.
Total Current Assets was $813.35 Mil.
Total Assets was $2,155.48 Mil.
Property, Plant and Equipment(Net PPE) was $22.55 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.75 Mil.
Selling, General, & Admin. Expense(SGA) was $24.76 Mil.
Total Current Liabilities was $7.14 Mil.
Long-Term Debt & Capital Lease Obligation was $110.59 Mil.
Net Income was 2.139 + 2.924 + 2.557 + 3.197 = $10.82 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 6.393 + 2.341 + 3.978 + 6.495 = $19.21 Mil.
|
Total Receivables was $11.28 Mil.
Revenue was 15.262 + 15.949 + 16.015 + 15.705 = $62.93 Mil.
Gross Profit was 15.262 + 15.949 + 16.015 + 15.705 = $62.93 Mil.
Total Current Assets was $840.27 Mil.
Total Assets was $2,134.93 Mil.
Property, Plant and Equipment(Net PPE) was $18.90 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.00 Mil.
Selling, General, & Admin. Expense(SGA) was $23.52 Mil.
Total Current Liabilities was $3.09 Mil.
Long-Term Debt & Capital Lease Obligation was $39.12 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) |
| = | (12.953 / 53.84) | / | (11.275 / 62.931) |
| = | 0.240583 | / | 0.179164 |
| | = | 1.3428 |
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) |
| = | (62.931 / 62.931) | / | (53.84 / 53.84) |
| = | 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 - (813.347 + 22.549) / 2155.481) | / | (1 - (840.266 + 18.895) / 2134.926) |
| = | 0.6122 | / | 0.597569 |
| | = | 1.0245 |
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 |
| = | 53.84 | / | 62.931 |
| | = | 0.8555 |
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)) |
| = | (1.998 / (1.998 + 18.895)) | / | (1.752 / (1.752 + 22.549)) |
| = | 0.09563 | / | 0.072096 |
| | = | 1.3264 |
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) |
| = | (24.759 / 53.84) | / | (23.517 / 62.931) |
| = | 0.459863 | / | 0.373695 |
| | = | 1.2306 |
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) |
| = | ((110.588 + 7.138) / 2155.481) | / | ((39.12 + 3.094) / 2134.926) |
| = | 0.054617 | / | 0.019773 |
| | = | 2.7622 |
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 |
| = | (10.817 - 0 | - | 19.207) | / | 2155.481 |
| | = | -0.003892 |
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.
Ames National has a M-score of -2.88 suggests that the company is unlikely to be a manipulator.
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