Woori Bank 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 Woori Bank 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 * 0.8086 | + | 0.528 * 1 | + | 0.404 * 1.0097 | + | 0.892 * 1.1045 | + | 0.115 * 0.8958 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8311 | + | 4.679 * -0.000964 | - | 0.327 * 0.9513 |
| = | -2.53 |
* 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 $9,167 Mil.
Revenue was 1519.832 + 1632.331 + 1663.342 + 1503.782 = $6,319 Mil.
Gross Profit was 1519.832 + 1632.331 + 1663.342 + 1503.782 = $6,319 Mil.
Total Current Assets was $14,529 Mil.
Total Assets was $294,513 Mil.
Property, Plant and Equipment(Net PPE) was $2,177 Mil.
Depreciation, Depletion and Amortization(DDA) was $234 Mil.
Selling, General, & Admin. Expense(SGA) was $3,138 Mil.
Total Current Liabilities was $15,288 Mil.
Long-Term Debt & Capital Lease Obligation was $39,261 Mil.
Net Income was 533.593 + 654.396 + 551.185 + 123.41 = $1,863 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1000.989 + 700.117 + 976.592 + -531.347 = $2,146 Mil.
|
Total Receivables was $10,264 Mil.
Revenue was 1564.435 + 1477.118 + 1265.44 + 1414.572 = $5,722 Mil.
Gross Profit was 1564.435 + 1477.118 + 1265.44 + 1414.572 = $5,722 Mil.
Total Current Assets was $16,285 Mil.
Total Assets was $280,908 Mil.
Property, Plant and Equipment(Net PPE) was $2,201 Mil.
Depreciation, Depletion and Amortization(DDA) was $210 Mil.
Selling, General, & Admin. Expense(SGA) was $3,419 Mil.
Total Current Liabilities was $15,939 Mil.
Long-Term Debt & Capital Lease Obligation was $38,752 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) |
| = | (9166.547 / 6319.287) | / | (10264.413 / 5721.565) |
| = | 1.450567 | / | 1.793987 |
| | = | 0.8086 |
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) |
| = | (5721.565 / 5721.565) | / | (6319.287 / 6319.287) |
| = | 1 | / | 1 |
| | = | 1 |
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 - (14528.573 + 2177.398) / 294513.079) | / | (1 - (16284.645 + 2201.067) / 280907.956) |
| = | 0.943276 | / | 0.934193 |
| | = | 1.0097 |
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 |
| = | 6319.287 | / | 5721.565 |
| | = | 1.1045 |
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)) |
| = | (209.663 / (209.663 + 2201.067)) | / | (234.13 / (234.13 + 2177.398)) |
| = | 0.086971 | / | 0.097088 |
| | = | 0.8958 |
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) |
| = | (3138.233 / 6319.287) | / | (3418.947 / 5721.565) |
| = | 0.496612 | / | 0.597555 |
| | = | 0.8311 |
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) |
| = | ((39260.913 + 15288.473) / 294513.079) | / | ((38751.812 + 15938.643) / 280907.956) |
| = | 0.185219 | / | 0.194692 |
| | = | 0.9513 |
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 |
| = | (1862.584 - 0 | - | 2146.351) | / | 294513.079 |
| | = | -0.000964 |
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.
Woori Bank has a M-score of -2.53 suggests that the company is unlikely to be a manipulator.
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