Liberty Global 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 Liberty Global 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 * 0.748 | + | 0.528 * 1.0088 | + | 0.404 * 1.5565 | + | 0.892 * 1.038 | + | 0.115 * 0.9299 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0155 | + | 4.679 * -0.0518 | - | 0.327 * 0.4617 |
| = | -2.53 |
* 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 $1,091 Mil.
Revenue was 3426.9 + 2954.5 + 2722.9 + 2875.8 = $11,980 Mil.
Gross Profit was 2380.3 + 2134.2 + 2007.9 + 2020.7 = $8,543 Mil.
Total Current Assets was $4,849 Mil.
Total Assets was $59,093 Mil.
Property, Plant and Equipment(Net PPE) was $8,054 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,331 Mil.
Selling, General, & Admin. Expense(SGA) was $2,226 Mil.
Total Current Liabilities was $4,467 Mil.
Long-Term Debt & Capital Lease Obligation was $13,867 Mil.
Net Income was -1030.5 + -1023.1 + -524.2 + 949.8 = $-1,628 Mil.
Non Operating Income was -1410.5 + -1501.3 + -939.1 + 1099.5 = $-2,751 Mil.
Cash Flow from Operations was 1493.5 + 1100.4 + 1142.1 + 449.8 = $4,186 Mil.
|
Accounts Receivable was $1,405 Mil.
Revenue was 2982.2 + 2840.9 + 2850.4 + 2868 = $11,542 Mil.
Gross Profit was 2132 + 2039.1 + 2064.1 + 2067.6 = $8,303 Mil.
Total Current Assets was $10,573 Mil.
Total Assets was $49,046 Mil.
Property, Plant and Equipment(Net PPE) was $13,843 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,652 Mil.
Selling, General, & Admin. Expense(SGA) was $2,112 Mil.
Total Current Liabilities was $8,652 Mil.
Long-Term Debt & Capital Lease Obligation was $24,305 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) |
| = | (1090.7 / 11980.1) | / | (1404.8 / 11541.5) |
| = | 0.09104265 | / | 0.12171728 |
| | = | 0.748 |
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) |
| = | (8302.8 / 11541.5) | / | (8543.1 / 11980.1) |
| = | 0.71938656 | / | 0.71310757 |
| | = | 1.0088 |
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 - (4849.1 + 8054.1) / 59092.7) | / | (1 - (10573.3 + 13843.4) / 49046.3) |
| = | 0.78164477 | / | 0.5021704 |
| | = | 1.5565 |
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 |
| = | 11980.1 | / | 11541.5 |
| | = | 1.038 |
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)) |
| = | (3652.2 / (3652.2 + 13843.4)) | / | (2331.3 / (2331.3 + 8054.1)) |
| = | 0.20874963 | / | 0.22447859 |
| | = | 0.9299 |
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) |
| = | (2225.9 / 11980.1) | / | (2111.7 / 11541.5) |
| = | 0.18579978 | / | 0.18296582 |
| | = | 1.0155 |
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) |
| = | ((13867.3 + 4467) / 59092.7) | / | ((24305.3 + 8651.7) / 49046.3) |
| = | 0.31026337 | / | 0.67195691 |
| | = | 0.4617 |
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 |
| = | (-1628 - -2751.4 | - | 4185.8) | / | 59092.7 |
| | = | -0.0518 |
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.
Liberty Global has a M-score of -2.53 suggests that the company is unlikely to be a manipulator.
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