Delta Air Lines 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 Delta Air Lines 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 * 2.8735 | + | 0.528 * -0.278 | + | 0.404 * 1.0049 | + | 0.892 * 0.2804 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.605 | + | 4.679 * 0.006 | - | 0.327 * 1.3207 |
| = | -2.08 |
* 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 (Mar21) TTM: | Last Year (Mar20) TTM: |
Accounts Receivable was $1,837 Mil.
Revenue was 4150 + 3973 + 3062 + 1468 = $12,653 Mil.
Gross Profit was -2196 + -1485 + -2024 + -3400 = $-9,105 Mil.
Total Current Assets was $17,853 Mil.
Total Assets was $73,083 Mil.
Property, Plant and Equipment(Net PPE) was $32,439 Mil.
Depreciation, Depletion and Amortization(DDA) was $492 Mil.
Selling, General, & Admin. Expense(SGA) was $333 Mil.
Total Current Liabilities was $20,688 Mil.
Long-Term Debt & Capital Lease Obligation was $31,629 Mil.
Net Income was -1177 + -755 + -5379 + -5717 = $-13,028 Mil.
Non Operating Income was 288 + -306 + -5527 + -4459 = $-10,004 Mil.
Cash Flow from Operations was 691 + -1286 + -2575 + -290 = $-3,460 Mil.
|
Accounts Receivable was $2,280 Mil.
Revenue was 8592 + 11439 + 12560 + 12536 = $45,127 Mil.
Gross Profit was 521 + 2341 + 3086 + 3079 = $9,027 Mil.
Total Current Assets was $10,275 Mil.
Total Assets was $68,738 Mil.
Property, Plant and Equipment(Net PPE) was $37,132 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $1,963 Mil.
Total Current Liabilities was $19,392 Mil.
Long-Term Debt & Capital Lease Obligation was $17,866 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) |
| = | (1837 / 12653) | / | (2280 / 45127) |
| = | 0.14518296 | / | 0.05052408 |
| | = | 2.8735 |
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) |
| = | (9027 / 45127) | / | (-9105 / 12653) |
| = | 0.20003546 | / | -0.71959219 |
| | = | -0.278 |
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 - (17853 + 32439) / 73083) | / | (1 - (10275 + 37132) / 68738) |
| = | 0.31185091 | / | 0.31032326 |
| | = | 1.0049 |
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 |
| = | 12653 | / | 45127 |
| | = | 0.2804 |
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 / (0 + 37132)) | / | (492 / (492 + 32439)) |
| = | 0 | / | 0.01494033 |
| | = | 1 |
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) |
| = | (333 / 12653) | / | (1963 / 45127) |
| = | 0.02631787 | / | 0.04349946 |
| | = | 0.605 |
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) |
| = | ((31629 + 20688) / 73083) | / | ((17866 + 19392) / 68738) |
| = | 0.71585731 | / | 0.54202915 |
| | = | 1.3207 |
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 |
| = | (-13028 - -10004 | - | -3460) | / | 73083 |
| | = | 0.006 |
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.
Delta Air Lines has a M-score of -2.08 suggests that the company is unlikely to be a manipulator.
Excel Add-In GURUF
API
My Portfolios
Create New Portfolio
Portfolio Contest
My Gurus
Personalize
My Gurus
0.18(0.38%) Volume: 12,172,168 4:00PM EDT
Email Alerts
Stock PDF
RSS
Website
Filings
Manual of Stocks™ Web APP
NYSE:DAL has been successfully added to your 
