LaSalle Hotel Properties 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 LaSalle Hotel Properties 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 * 1.0126 | + | 0.528 * 1.0267 | + | 0.404 * 1.0515 | + | 0.892 * 0.9476 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.062 | + | 4.679 * -0.046435 | - | 0.327 * 0.9833 |
| = | -2.70 |
* 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 (Sep18) TTM: | Last Year (Sep17) TTM: |
Total Receivables was $41.73 Mil.
Revenue was 292.41 + 301.164 + 219.161 + 254.582 = $1,067.32 Mil.
Gross Profit was 104.63 + 115.214 + 54.004 + 81.648 = $355.50 Mil.
Total Current Assets was $401.44 Mil.
Total Assets was $3,659.45 Mil.
Property, Plant and Equipment(Net PPE) was $0.00 Mil.
Depreciation, Depletion and Amortization(DDA) was $182.18 Mil.
Selling, General, & Admin. Expense(SGA) was $42.89 Mil.
Total Current Liabilities was $158.65 Mil.
Long-Term Debt & Capital Lease Obligation was $1,078.44 Mil.
Net Income was -83.293 + 35.67 + -6.962 + 16.012 = $-38.57 Mil.
Non Operating Income was -121.917 + -8.68 + -2.651 + 0 = $-133.25 Mil.
Cash Flow from Operations was 75.419 + 87.308 + 39.56 + 62.315 = $264.60 Mil.
|
Total Receivables was $43.50 Mil.
Revenue was 283.453 + 303.811 + 251.036 + 288.067 = $1,126.37 Mil.
Gross Profit was 101.688 + 118.488 + 69.61 + 95.41 = $385.20 Mil.
Total Current Assets was $593.36 Mil.
Total Assets was $3,870.55 Mil.
Property, Plant and Equipment(Net PPE) was $0.00 Mil.
Depreciation, Depletion and Amortization(DDA) was $182.52 Mil.
Selling, General, & Admin. Expense(SGA) was $42.62 Mil.
Total Current Liabilities was $210.97 Mil.
Long-Term Debt & Capital Lease Obligation was $1,119.73 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Total Receivables 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) |
| = | (41.732 / 1067.317) | / | (43.495 / 1126.367) |
| = | 0.0391 | / | 0.038615 |
| | = | 1.0126 |
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) |
| = | (385.196 / 1126.367) | / | (355.496 / 1067.317) |
| = | 0.341981 | / | 0.333074 |
| | = | 1.0267 |
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 - (401.443 + 0) / 3659.451) | / | (1 - (593.358 + 0) / 3870.553) |
| = | 0.8903 | / | 0.846699 |
| | = | 1.0515 |
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 |
| = | 1067.317 | / | 1126.367 |
| | = | 0.9476 |
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)) |
| = | (182.515 / (182.515 + 0)) | / | (182.18 / (182.18 + 0)) |
| = | 1 | / | 1 |
| | = | 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) |
| = | (42.887 / 1067.317) | / | (42.618 / 1126.367) |
| = | 0.040182 | / | 0.037837 |
| | = | 1.062 |
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) |
| = | ((1078.44 + 158.653) / 3659.451) | / | ((1119.733 + 210.974) / 3870.553) |
| = | 0.338054 | / | 0.343803 |
| | = | 0.9833 |
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 |
| = | (-38.573 - -133.248 | - | 264.602) | / | 3659.451 |
| | = | -0.046435 |
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.
LaSalle Hotel Properties has a M-score of -2.70 suggests that the company is unlikely to be a manipulator.
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