Broadway Financial 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 Broadway Financial 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 * 1.2871 | + | 0.528 * 1 | + | 0.404 * 1.2687 | + | 0.892 * 1.1865 | + | 0.115 * 1.7127 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8082 | + | 4.679 * -0.003393 | - | 0.327 * 4.1978 |
| = | -2.89 |
* 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 $4.11 Mil.
Revenue was 7.528 + 8.563 + 9.33 + 8.973 = $34.39 Mil.
Gross Profit was 7.528 + 8.563 + 9.33 + 8.973 = $34.39 Mil.
Total Current Assets was $337.37 Mil.
Total Assets was $1,231.37 Mil.
Property, Plant and Equipment(Net PPE) was $10.00 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.54 Mil.
Selling, General, & Admin. Expense(SGA) was $13.22 Mil.
Total Current Liabilities was $12.18 Mil.
Long-Term Debt & Capital Lease Obligation was $224.27 Mil.
Net Income was 0.243 + 1.573 + 1.506 + 1.318 = $4.64 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was -1.666 + 3.801 + 0.996 + 5.687 = $8.82 Mil.
|
Total Receivables was $2.69 Mil.
Revenue was 8.299 + 7.453 + 6.636 + 6.6 = $28.99 Mil.
Gross Profit was 8.299 + 7.453 + 6.636 + 6.6 = $28.99 Mil.
Total Current Assets was $521.13 Mil.
Total Assets was $1,224.22 Mil.
Property, Plant and Equipment(Net PPE) was $10.35 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.99 Mil.
Selling, General, & Admin. Expense(SGA) was $13.79 Mil.
Total Current Liabilities was $9.07 Mil.
Long-Term Debt & Capital Lease Obligation was $46.93 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) |
| = | (4.114 / 34.394) | / | (2.694 / 28.988) |
| = | 0.119614 | / | 0.092935 |
| | = | 1.2871 |
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) |
| = | (28.988 / 28.988) | / | (34.394 / 34.394) |
| = | 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 - (337.372 + 10) / 1231.372) | / | (1 - (521.129 + 10.354) / 1224.224) |
| = | 0.717898 | / | 0.565861 |
| | = | 1.2687 |
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 |
| = | 34.394 | / | 28.988 |
| | = | 1.1865 |
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)) |
| = | (0.994 / (0.994 + 10.354)) | / | (0.539 / (0.539 + 10)) |
| = | 0.087593 | / | 0.051143 |
| | = | 1.7127 |
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) |
| = | (13.222 / 34.394) | / | (13.789 / 28.988) |
| = | 0.384428 | / | 0.47568 |
| | = | 0.8082 |
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) |
| = | ((224.268 + 12.176) / 1231.372) | / | ((46.932 + 9.066) / 1224.224) |
| = | 0.192017 | / | 0.045742 |
| | = | 4.1978 |
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 |
| = | (4.64 - 0 | - | 8.818) | / | 1231.372 |
| | = | -0.003393 |
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.
Broadway Financial has a M-score of -2.89 suggests that the company is unlikely to be a manipulator.
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