Columbia 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 Columbia 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 * 1.0758 | + | 0.528 * 1 | + | 0.404 * 0.9352 | + | 0.892 * 1.2394 | + | 0.115 * 0.6395 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9513 | + | 4.679 * 0.0056 | - | 0.327 * 0.5957 |
| = | -2.10 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Dec20) TTM: | Last Year (Dec19) TTM: |
Accounts Receivable was $29.5 Mil.
Revenue was 68.638 + 64.233 + 62.879 + 57.093 = $252.8 Mil.
Gross Profit was 68.638 + 64.233 + 62.879 + 57.093 = $252.8 Mil.
Total Current Assets was $1,769.4 Mil.
Total Assets was $8,798.5 Mil.
Property, Plant and Equipment(Net PPE) was $76.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.5 Mil.
Selling, General, & Admin. Expense(SGA) was $108.6 Mil.
Total Current Liabilities was $176.7 Mil.
Long-Term Debt & Capital Lease Obligation was $799.4 Mil.
Net Income was 20.654 + 15.087 + 15.097 + 6.765 = $57.6 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 0 + 4.958 + -39.995 + 43.167 = $8.1 Mil.
|
Accounts Receivable was $22.1 Mil.
Revenue was 56.136 + 51.831 + 47.618 + 48.421 = $204.0 Mil.
Gross Profit was 56.136 + 51.831 + 47.618 + 48.421 = $204.0 Mil.
Total Current Assets was $1,196.0 Mil.
Total Assets was $8,188.7 Mil.
Property, Plant and Equipment(Net PPE) was $73.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $5.0 Mil.
Selling, General, & Admin. Expense(SGA) was $92.1 Mil.
Total Current Liabilities was $225.6 Mil.
Long-Term Debt & Capital Lease Obligation was $1,299.2 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Accounts Receivable 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) |
| = | (29.456 / 252.843) | / | (22.092 / 204.006) |
| = | 0.11649917 | / | 0.10829093 |
| | = | 1.0758 |
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) |
| = | (204.006 / 204.006) | / | (252.843 / 252.843) |
| = | 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 - (1769.365 + 75.974) / 8798.536) | / | (1 - (1195.975 + 72.967) / 8188.694) |
| = | 0.79026749 | / | 0.84503732 |
| | = | 0.9352 |
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 |
| = | 252.843 | / | 204.006 |
| | = | 1.2394 |
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)) |
| = | (4.993 / (4.993 + 72.967)) | / | (8.456 / (8.456 + 75.974)) |
| = | 0.06404566 | / | 0.10015397 |
| | = | 0.6395 |
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) |
| = | (108.571 / 252.843) | / | (92.084 / 204.006) |
| = | 0.42940085 | / | 0.45137888 |
| | = | 0.9513 |
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) |
| = | ((799.364 + 176.691) / 8798.536) | / | ((1299.222 + 225.606) / 8188.694) |
| = | 0.1109338 | / | 0.18621138 |
| | = | 0.5957 |
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 |
| = | (57.603 - 0 | - | 8.13) | / | 8798.536 |
| | = | 0.0056 |
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.
Columbia Financial has a M-score of -2.10 suggests that the company is unlikely to be a manipulator.
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