Iamgold 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 Iamgold 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 * 2.4934 | + | 0.528 * 0.3241 | + | 0.404 * 1.002 | + | 0.892 * 1.1656 | + | 0.115 * 1.0831 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8179 | + | 4.679 * -0.0658 | - | 0.327 * 1.0947 |
| = | -1.61 |
* 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 (Dec20) TTM: | Last Year (Dec19) TTM: |
Accounts Receivable was $9 Mil.
Revenue was 347.5 + 335.1 + 284.6 + 274.5 = $1,242 Mil.
Gross Profit was 84 + 78.1 + 56.3 + 31.9 = $250 Mil.
Total Current Assets was $1,396 Mil.
Total Assets was $4,154 Mil.
Property, Plant and Equipment(Net PPE) was $2,417 Mil.
Depreciation, Depletion and Amortization(DDA) was $268 Mil.
Selling, General, & Admin. Expense(SGA) was $45 Mil.
Total Current Liabilities was $335 Mil.
Long-Term Debt & Capital Lease Obligation was $508 Mil.
Net Income was 63.1 + -11.6 + 25.5 + -34.4 = $43 Mil.
Non Operating Income was 49.6 + -54.5 + 7 + -36.2 = $-34 Mil.
Cash Flow from Operations was 128.7 + 105.1 + 72.4 + 44 = $350 Mil.
|
Accounts Receivable was $3 Mil.
Revenue was 293.4 + 274.4 + 246.5 + 251 = $1,065 Mil.
Gross Profit was 41.1 + 22.8 + 6.6 + -0.9 = $70 Mil.
Total Current Assets was $1,263 Mil.
Total Assets was $3,862 Mil.
Property, Plant and Equipment(Net PPE) was $2,282 Mil.
Depreciation, Depletion and Amortization(DDA) was $277 Mil.
Selling, General, & Admin. Expense(SGA) was $47 Mil.
Total Current Liabilities was $266 Mil.
Long-Term Debt & Capital Lease Obligation was $449 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) |
| = | (9.3 / 1241.7) | / | (3.2 / 1065.3) |
| = | 0.00748973 | / | 0.00300385 |
| | = | 2.4934 |
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) |
| = | (69.6 / 1065.3) | / | (250.3 / 1241.7) |
| = | 0.06533371 | / | 0.20157848 |
| | = | 0.3241 |
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 - (1395.5 + 2416.8) / 4154.3) | / | (1 - (1263 + 2281.8) / 3862.1) |
| = | 0.08232434 | / | 0.08215738 |
| | = | 1.002 |
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 |
| = | 1241.7 | / | 1065.3 |
| | = | 1.1656 |
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)) |
| = | (276.6 / (276.6 + 2281.8)) | / | (268 / (268 + 2416.8)) |
| = | 0.10811445 | / | 0.09982122 |
| | = | 1.0831 |
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) |
| = | (44.9 / 1241.7) | / | (47.1 / 1065.3) |
| = | 0.0361601 | / | 0.0442129 |
| | = | 0.8179 |
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) |
| = | ((507.5 + 334.8) / 4154.3) | / | ((449.3 + 266) / 3862.1) |
| = | 0.20275377 | / | 0.18521012 |
| | = | 1.0947 |
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 |
| = | (42.6 - -34.1 | - | 350.2) | / | 4154.3 |
| | = | -0.0658 |
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.
Iamgold has a M-score of -1.61 signals that the company is likely to be a manipulator.
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