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Note: Financial institutions were excluded from the sample in Beneish paper when calculating Beneish M-Score. Thus, the prediction might not fit banks and insurance companies.
The zones of discrimination for M-Score is as such:
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.
Good Sign:
Beneish M-Score -6.54 no higher than -1.78, which implies that the company is unlikely to be a manipulator.
The historical rank and industry rank for National Bankshares's Beneish M-Score or its related term are showing as below:
During the past 13 years, the highest Beneish M-Score of National Bankshares was -2.11. The lowest was -6.54. And the median was -2.50.
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 National Bankshares 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 * 1.3404 | + | 0.528 * 1 | + | 0.404 * 1.0132 | + | 0.892 * 0.7849 | + | 0.115 * 0.8726 | |
- | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI | |||||||
- | 0.172 * 1.3544 | + | 4.679 * 0.000101 | - | 0.327 * 13.5714 | |||||||
= | -6.54 |
* 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 $6.31 Mil. Revenue was 10.734 + 10.755 + 12.008 + 13.145 = $46.64 Mil. Gross Profit was 10.734 + 10.755 + 12.008 + 13.145 = $46.64 Mil. Total Current Assets was $711.52 Mil. Total Assets was $1,655.37 Mil. Property, Plant and Equipment(Net PPE) was $11.11 Mil. Depreciation, Depletion and Amortization(DDA) was $0.75 Mil. Selling, General, & Admin. Expense(SGA) was $18.07 Mil. Total Current Liabilities was $1.42 Mil. Long-Term Debt & Capital Lease Obligation was $0.00 Mil. Net Income was 4.185 + 3.074 + 3.901 + 4.531 = $15.69 Mil. Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil. Cash Flow from Operations was 2.191 + 4.948 + 4.051 + 4.333 = $15.52 Mil. |
Total Receivables was $6.00 Mil. Revenue was 18.812 + 14.542 + 13.387 + 12.686 = $59.43 Mil. Gross Profit was 18.812 + 14.542 + 13.387 + 12.686 = $59.43 Mil. Total Current Assets was $734.28 Mil. Total Assets was $1,677.55 Mil. Property, Plant and Equipment(Net PPE) was $10.37 Mil. Depreciation, Depletion and Amortization(DDA) was $0.61 Mil. Selling, General, & Admin. Expense(SGA) was $17.00 Mil. Total Current Liabilities was $0.11 Mil. Long-Term Debt & Capital Lease Obligation was $0.00 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) |
= | (6.313 / 46.642) | / | (6.001 / 59.427) | |
= | 0.13535 | / | 0.100981 | |
= | 1.3404 |
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) | |
= | (59.427 / 59.427) | / | (46.642 / 46.642) | |
= | 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 - (711.517 + 11.109) / 1655.37) | / | (1 - (734.282 + 10.371) / 1677.551) | |
= | 0.563466 | / | 0.556107 | |
= | 1.0132 |
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 | |
= | 46.642 | / | 59.427 | |
= | 0.7849 |
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)) |
= | (0.609 / (0.609 + 10.371)) | / | (0.754 / (0.754 + 11.109)) | |
= | 0.055464 | / | 0.063559 | |
= | 0.8726 |
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) |
= | (18.067 / 46.642) | / | (16.996 / 59.427) | |
= | 0.387355 | / | 0.285998 | |
= | 1.3544 |
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) |
= | ((0 + 1.416) / 1655.37) | / | ((0 + 0.106) / 1677.551) | |
= | 0.000855 | / | 6.3E-5 | |
= | 13.5714 |
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 | |
= | (15.691 - 0 | - | 15.523) | / | 1655.37 | |
= | 0.000101 |
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.
National Bankshares has a M-score of -6.54 suggests that the company is unlikely to be a manipulator.
Thank you for viewing the detailed overview of National Bankshares's Beneish M-Score provided by GuruFocus.com. Please click on the following links to see related term pages.
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