Great-West Lifeco 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 Great-West Lifeco 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 * | + | 0.528 * | + | 0.404 * | + | 0.892 * | + | 0.115 * |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * | + | 4.679 * | - | 0.327 * |
| = | |
* 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 (Mar24) TTM: | Last Year (Mar23) TTM: |
Total Receivables was $4,235 Mil.
Revenue was 1542.553 + 13178.295 + 181.066 + 636.008 = $15,538 Mil.
Gross Profit was 1542.553 + 13178.295 + 181.066 + 636.008 = $15,538 Mil.
Total Current Assets was $19,934 Mil.
Total Assets was $544,269 Mil.
Property, Plant and Equipment(Net PPE) was $789 Mil.
Depreciation, Depletion and Amortization(DDA) was $356 Mil.
Selling, General, & Admin. Expense(SGA) was $3,585 Mil.
Total Current Liabilities was $2,247 Mil.
Long-Term Debt & Capital Lease Obligation was $6,693 Mil.
Net Income was 732.861 + 576.178 + 692.484 + 399.669 = $2,401 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 186.909 + 3831.246 + 347.351 + -441.066 = $3,924 Mil.
|
Total Receivables was $3,355 Mil.
Revenue was 5278.813 + 342.289 + -2076.617 + -4115.12 = $-571 Mil.
Gross Profit was 5278.813 + 342.289 + -2076.617 + -4115.12 = $-571 Mil.
Total Current Assets was $18,044 Mil.
Total Assets was $505,630 Mil.
Property, Plant and Equipment(Net PPE) was $824 Mil.
Depreciation, Depletion and Amortization(DDA) was $367 Mil.
Selling, General, & Admin. Expense(SGA) was $3,161 Mil.
Total Current Liabilities was $1,840 Mil.
Long-Term Debt & Capital Lease Obligation was $7,536 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) |
| = | (4234.634 / 15537.922) | / | (3354.528 / -570.635) |
| = | 0.272535 | / | |
| | = | |
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) |
| = | (-570.635 / -570.635) | / | (15537.922 / 15537.922) |
| = | | / | 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 - (19933.511 + 789.007) / 544268.617) | / | (1 - (18043.558 + 823.65) / 505629.613) |
| = | 0.961926 | / | 0.962686 |
| | = | |
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 |
| = | 15537.922 | / | -570.635 |
| | = | |
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)) |
| = | (367.192 / (367.192 + 823.65)) | / | (355.729 / (355.729 + 789.007)) |
| = | 0.308347 | / | 0.310752 |
| | = | |
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) |
| = | (3584.84 / 15537.922) | / | (3161.152 / -570.635) |
| = | 0.230716 | / | |
| | = | |
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) |
| = | ((6692.524 + 2246.602) / 544268.617) | / | ((7535.628 + 1839.509) / 505629.613) |
| = | 0.016424 | / | 0.018542 |
| | = | |
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 |
| = | (2401.192 - 0 | - | 3924.44) | / | 544268.617 |
| | = | -0.002799 |
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.
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