BlackBerry 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 BlackBerry 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 * 0.9859 | + | 0.528 * 1.0189 | + | 0.404 * 0.9395 | + | 0.892 * 0.8587 | + | 0.115 * 0.8149 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8126 | + | 4.679 * -0.0607 | - | 0.327 * 1.3775 |
| = | -3.03 |
* All numbers are in millions except for per share data and ratio. All numbers are indicated in the company's associated stock exchange currency.
| This Year (Feb21) TTM: | Last Year (Feb20) TTM: |
Accounts Receivable was $182.0 Mil.
Revenue was 210 + 218 + 259 + 206 = $893.0 Mil.
Gross Profit was 152 + 149 + 199 + 143 = $643.0 Mil.
Total Current Assets was $1,006.0 Mil.
Total Assets was $2,818.0 Mil.
Property, Plant and Equipment(Net PPE) was $111.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $198.0 Mil.
Selling, General, & Admin. Expense(SGA) was $344.0 Mil.
Total Current Liabilities was $429.0 Mil.
Long-Term Debt & Capital Lease Obligation was $810.0 Mil.
Net Income was -315 + -130 + -23 + -636 = $-1,104.0 Mil.
Non Operating Income was -280 + -96 + -44 + -595 = $-1,015.0 Mil.
Cash Flow from Operations was 52 + 30 + 31 + -31 = $82.0 Mil.
|
Accounts Receivable was $215.0 Mil.
Revenue was 282 + 267 + 244 + 247 = $1,040.0 Mil.
Gross Profit was 212 + 198 + 176 + 177 = $763.0 Mil.
Total Current Assets was $1,196.0 Mil.
Total Assets was $3,888.0 Mil.
Property, Plant and Equipment(Net PPE) was $194.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $212.0 Mil.
Selling, General, & Admin. Expense(SGA) was $493.0 Mil.
Total Current Liabilities was $1,121.0 Mil.
Long-Term Debt & Capital Lease Obligation was $120.0 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) |
| = | (182 / 893) | / | (215 / 1040) |
| = | 0.20380739 | / | 0.20673077 |
| | = | 0.9859 |
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) |
| = | (763 / 1040) | / | (643 / 893) |
| = | 0.73365385 | / | 0.72004479 |
| | = | 1.0189 |
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 - (1006 + 111) / 2818) | / | (1 - (1196 + 194) / 3888) |
| = | 0.60361959 | / | 0.64248971 |
| | = | 0.9395 |
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 |
| = | 893 | / | 1040 |
| | = | 0.8587 |
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)) |
| = | (212 / (212 + 194)) | / | (198 / (198 + 111)) |
| = | 0.52216749 | / | 0.6407767 |
| | = | 0.8149 |
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) |
| = | (344 / 893) | / | (493 / 1040) |
| = | 0.38521837 | / | 0.47403846 |
| | = | 0.8126 |
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) |
| = | ((810 + 429) / 2818) | / | ((120 + 1121) / 3888) |
| = | 0.43967353 | / | 0.31918724 |
| | = | 1.3775 |
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 |
| = | (-1104 - -1015 | - | 82) | / | 2818 |
| | = | -0.0607 |
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.
BlackBerry has a M-score of -3.03 suggests that the company is unlikely to be a manipulator.
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