Coca-Cola 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 Coca-Cola 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 * 0.9442 | + | 0.528 * 1.0208 | + | 0.404 * 1.0943 | + | 0.892 * 0.8994 | + | 0.115 * 0.9307 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9048 | + | 4.679 * -0.0476 | - | 0.327 * 0.9322 |
| = | -2.76 |
* 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 (Mar21) TTM: | Last Year (Mar20) TTM: |
Accounts Receivable was $3,762 Mil.
Revenue was 9020 + 8611 + 8652 + 7150 = $33,433 Mil.
Gross Profit was 5515 + 5033 + 5181 + 4137 = $19,866 Mil.
Total Current Assets was $21,932 Mil.
Total Assets was $89,993 Mil.
Property, Plant and Equipment(Net PPE) was $10,673 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,535 Mil.
Selling, General, & Admin. Expense(SGA) was $9,752 Mil.
Total Current Liabilities was $16,486 Mil.
Long-Term Debt & Capital Lease Obligation was $40,170 Mil.
Net Income was 2245 + 1456 + 1737 + 1779 = $7,217 Mil.
Non Operating Income was 293 + -570 + 461 + 390 = $574 Mil.
Cash Flow from Operations was 1636 + 3624 + 3434 + 2230 = $10,924 Mil.
|
Accounts Receivable was $4,430 Mil.
Revenue was 8601 + 9068 + 9507 + 9997 = $37,173 Mil.
Gross Profit was 5230 + 5502 + 5740 + 6076 = $22,548 Mil.
Total Current Assets was $28,234 Mil.
Total Assets was $94,013 Mil.
Property, Plant and Equipment(Net PPE) was $10,993 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,457 Mil.
Selling, General, & Admin. Expense(SGA) was $11,984 Mil.
Total Current Liabilities was $32,397 Mil.
Long-Term Debt & Capital Lease Obligation was $31,094 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) |
| = | (3762 / 33433) | / | (4430 / 37173) |
| = | 0.11252355 | / | 0.11917252 |
| | = | 0.9442 |
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) |
| = | (22548 / 37173) | / | (19866 / 33433) |
| = | 0.60656928 | / | 0.59420333 |
| | = | 1.0208 |
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 - (21932 + 10673) / 89993) | / | (1 - (28234 + 10993) / 94013) |
| = | 0.63769404 | / | 0.58274919 |
| | = | 1.0943 |
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 |
| = | 33433 | / | 37173 |
| | = | 0.8994 |
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)) |
| = | (1457 / (1457 + 10993)) | / | (1535 / (1535 + 10673)) |
| = | 0.11702811 | / | 0.12573722 |
| | = | 0.9307 |
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) |
| = | (9752 / 33433) | / | (11984 / 37173) |
| = | 0.29168785 | / | 0.32238453 |
| | = | 0.9048 |
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) |
| = | ((40170 + 16486) / 89993) | / | ((31094 + 32397) / 94013) |
| = | 0.62956008 | / | 0.67534277 |
| | = | 0.9322 |
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 |
| = | (7217 - 574 | - | 10924) | / | 89993 |
| | = | -0.0476 |
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.
Coca-Cola Co has a M-score of -2.76 suggests that the company is unlikely to be a manipulator.
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