Delek Group 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 Delek Group 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 * 0.2718 | + | 0.528 * 0.9473 | + | 0.404 * 3.5495 | + | 0.892 * 2.0626 | + | 0.115 * 0.269 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * -16.4194 | + | 4.679 * -0.1736 | - | 0.327 * 0.7807 |
| = | 0.97 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Sep20) TTM: | Last Year (Sep19) TTM: |
Accounts Receivable was $289 Mil.
Revenue was 515.72601367385 + 585.29609176475 + 893.21930696708 + 2072.2808913076 = $4,067 Mil.
Gross Profit was 248.63740952487 + 244.70518771973 + 284.02740577111 + 422.56260475212 = $1,200 Mil.
Total Current Assets was $2,084 Mil.
Total Assets was $11,926 Mil.
Property, Plant and Equipment(Net PPE) was $7,200 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,073 Mil.
Selling, General, & Admin. Expense(SGA) was $154 Mil.
Total Current Liabilities was $3,561 Mil.
Long-Term Debt & Capital Lease Obligation was $4,711 Mil.
Net Income was 45.069311458888 + -98.608023728841 + -836.65580869317 + -94.070844722913 = $-984 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 175.13510962883 + 340.89338264541 + 254.68698153277 + 315.48518021221 = $1,086 Mil.
|
Accounts Receivable was $516 Mil.
Revenue was 171.20288782369 + 591.64814237305 + 600.42002178451 + 608.28446539478 = $1,972 Mil.
Gross Profit was 80.459307705128 + 122.80631176046 + 178.76485283357 + 169.08553762093 = $551 Mil.
Total Current Assets was $32,685 Mil.
Total Assets was $42,669 Mil.
Property, Plant and Equipment(Net PPE) was $7,321 Mil.
Depreciation, Depletion and Amortization(DDA) was $469 Mil.
Selling, General, & Admin. Expense(SGA) was $-5 Mil.
Total Current Liabilities was $31,411 Mil.
Long-Term Debt & Capital Lease Obligation was $6,499 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) |
| = | (289.16954197783 / 4066.5223037133) | / | (515.72601367385 / 1971.555517376) |
| = | 0.07110979 | / | 0.26158331 |
| | = | 0.2718 |
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) |
| = | (551.11600992009 / 1971.555517376) | / | (1199.9326077678 / 4066.5223037133) |
| = | 0.2795336 | / | 0.29507587 |
| | = | 0.9473 |
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 - (2083.7750781227 + 7200.2006038078) / 11925.521299182) | / | (1 - (32684.627644306 + 7321.1920439659) / 42668.538807551) |
| = | 0.22150358 | / | 0.06240474 |
| | = | 3.5495 |
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 |
| = | 4066.5223037133 | / | 1971.555517376 |
| | = | 2.0626 |
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)) |
| = | (468.53935201219 / (468.53935201219 + 7321.1920439659)) | / | (2073.4908057092 / (2073.4908057092 + 7200.2006038078)) |
| = | 0.06014833 | / | 0.22358851 |
| | = | 0.269 |
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) |
| = | (153.65912900077 / 4066.5223037133) | / | (-4.5371790059283 / 1971.555517376) |
| = | 0.03778637 | / | -0.00230132 |
| | = | -16.4194 |
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) |
| = | ((4711.4066797559 + 3560.7780838525) / 11925.521299182) | / | ((6499.3576866921 + 31410.890258041) / 42668.538807551) |
| = | 0.69365393 | / | 0.88848245 |
| | = | 0.7807 |
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 |
| = | (-984.26536568604 - 0 | - | 1086.2006540192) | / | 11925.521299182 |
| | = | -0.1736 |
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.
Delek Group has a M-score of 0.97 signals that the company is likely to be a manipulator.
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