Ryder System 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 Ryder System 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 * 1.0514 | + | 0.528 * 1.0137 | + | 0.404 * 1.0318 | + | 0.892 * 0.9433 | + | 0.115 * 0.8356 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0766 | + | 4.679 * -0.1704 | - | 0.327 * 0.977 |
| = | -3.29 |
* 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 $1,052 Mil.
Revenue was 2212.928 + 2150.575 + 1895.282 + 2161.306 = $8,420 Mil.
Gross Profit was 391.969 + 366.784 + 248.599 + 268.136 = $1,275 Mil.
Total Current Assets was $1,596 Mil.
Total Assets was $12,932 Mil.
Property, Plant and Equipment(Net PPE) was $10,686 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,143 Mil.
Selling, General, & Admin. Expense(SGA) was $922 Mil.
Total Current Liabilities was $2,053 Mil.
Long-Term Debt & Capital Lease Obligation was $6,280 Mil.
Net Income was 25.628 + 35.834 + -74.099 + -109.613 = $-122 Mil.
Non Operating Income was 7.904 + -8.219 + -37.678 + -61.52 = $-100 Mil.
Cash Flow from Operations was 484.714 + 597.804 + 660.199 + 438.586 = $2,181 Mil.
|
Accounts Receivable was $1,060 Mil.
Revenue was 2276.549 + 2223.932 + 2244.993 + 2180.327 = $8,926 Mil.
Gross Profit was 278.988 + 257.831 + 432.685 + 401.073 = $1,371 Mil.
Total Current Assets was $1,562 Mil.
Total Assets was $14,475 Mil.
Property, Plant and Equipment(Net PPE) was $12,208 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,980 Mil.
Selling, General, & Admin. Expense(SGA) was $907 Mil.
Total Current Liabilities was $2,625 Mil.
Long-Term Debt & Capital Lease Obligation was $6,922 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) |
| = | (1051.618 / 8420.091) | / | (1060.298 / 8925.801) |
| = | 0.1248939 | / | 0.11879024 |
| | = | 1.0514 |
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) |
| = | (1370.577 / 8925.801) | / | (1275.488 / 8420.091) |
| = | 0.15355227 | / | 0.1514815 |
| | = | 1.0137 |
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 - (1595.529 + 10686.387) / 12931.954) | / | (1 - (1562.051 + 12208.079) / 14475.334) |
| = | 0.05026603 | / | 0.04871763 |
| | = | 1.0318 |
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 |
| = | 8420.091 | / | 8925.801 |
| | = | 0.9433 |
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)) |
| = | (1980.218 / (1980.218 + 12208.079)) | / | (2142.932 / (2142.932 + 10686.387)) |
| = | 0.139567 | / | 0.16703396 |
| | = | 0.8356 |
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) |
| = | (921.573 / 8420.091) | / | (907.449 / 8925.801) |
| = | 0.10944929 | / | 0.10166583 |
| | = | 1.0766 |
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) |
| = | ((6280.084 + 2053.148) / 12931.954) | / | ((6921.585 + 2625.353) / 14475.334) |
| = | 0.64439079 | / | 0.65953145 |
| | = | 0.977 |
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 |
| = | (-122.25 - -99.513 | - | 2181.303) | / | 12931.954 |
| | = | -0.1704 |
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.
Ryder System has a M-score of -3.29 suggests that the company is unlikely to be a manipulator.
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