The Walt Disney Co 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 The Walt Disney Co 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 * 0.9307 | + | 0.528 * 1.2024 | + | 0.404 * 0.9622 | + | 0.892 * 0.9389 | + | 0.115 * 0.8156 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.1397 | + | 4.679 * -0.0319 | - | 0.327 * 1.102 |
| = | -2.73 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Sep20) TTM: | Last Year (Sep19) TTM: |
Accounts Receivable was $11,299 Mil.
Revenue was 14707 + 11779 + 18009 + 20858 = $65,353 Mil.
Gross Profit was 3694 + 3883 + 6091 + 7842 = $21,510 Mil.
Total Current Assets was $35,251 Mil.
Total Assets was $201,549 Mil.
Property, Plant and Equipment(Net PPE) was $32,078 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,345 Mil.
Selling, General, & Admin. Expense(SGA) was $12,358 Mil.
Total Current Liabilities was $26,628 Mil.
Long-Term Debt & Capital Lease Obligation was $52,917 Mil.
Net Income was -710 + -4721 + 460 + 2107 = $-2,864 Mil.
Non Operating Income was 361 + -4476 + -8 + 77 = $-4,046 Mil.
Cash Flow from Operations was 1667 + 1162 + 3157 + 1630 = $7,616 Mil.
|
Accounts Receivable was $12,930 Mil.
Revenue was 19118 + 20262 + 14922 + 15303 = $69,605 Mil.
Gross Profit was 7274 + 7425 + 6546 + 6302 = $27,547 Mil.
Total Current Assets was $28,124 Mil.
Total Assets was $193,984 Mil.
Property, Plant and Equipment(Net PPE) was $31,603 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,167 Mil.
Selling, General, & Admin. Expense(SGA) was $11,549 Mil.
Total Current Liabilities was $31,341 Mil.
Long-Term Debt & Capital Lease Obligation was $38,129 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) |
| = | (11299 / 65353) | / | (12930 / 69605) |
| = | 0.17289183 | / | 0.18576252 |
| | = | 0.9307 |
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) |
| = | (27547 / 69605) | / | (21510 / 65353) |
| = | 0.3957618 | / | 0.32913562 |
| | = | 1.2024 |
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 - (35251 + 32078) / 201549) | / | (1 - (28124 + 31603) / 193984) |
| = | 0.66594228 | / | 0.69210347 |
| | = | 0.9622 |
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 |
| = | 65353 | / | 69605 |
| | = | 0.9389 |
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)) |
| = | (4167 / (4167 + 31603)) | / | (5345 / (5345 + 32078)) |
| = | 0.11649427 | / | 0.1428266 |
| | = | 0.8156 |
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) |
| = | (12358 / 65353) | / | (11549 / 69605) |
| = | 0.18909614 | / | 0.16592199 |
| | = | 1.1397 |
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) |
| = | ((52917 + 26628) / 201549) | / | ((38129 + 31341) / 193984) |
| = | 0.39466829 | / | 0.35812232 |
| | = | 1.102 |
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 |
| = | (-2864 - -4046 | - | 7616) | / | 201549 |
| | = | -0.0319 |
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.
The Walt Disney Co has a M-score of -2.73 suggests that the company is unlikely to be a manipulator.
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