Kentucky Bancshares 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 Kentucky Bancshares 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 * 1.1535 | + | 0.528 * 1 | + | 0.404 * 0.8802 | + | 0.892 * 1.0174 | + | 0.115 * 0.7808 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0341 | + | 4.679 * -0.002005 | - | 0.327 * 0.607 |
| = | -2.28 |
* 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 (Mar21) TTM: | Last Year (Mar20) TTM: |
Total Receivables was $4.71 Mil.
Revenue was 12.367 + 12.973 + 12.323 + 12.625 = $50.29 Mil.
Gross Profit was 12.367 + 12.973 + 12.323 + 12.625 = $50.29 Mil.
Total Current Assets was $437.88 Mil.
Total Assets was $1,274.26 Mil.
Property, Plant and Equipment(Net PPE) was $27.74 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.25 Mil.
Selling, General, & Admin. Expense(SGA) was $23.91 Mil.
Total Current Liabilities was $6.03 Mil.
Long-Term Debt & Capital Lease Obligation was $99.22 Mil.
Net Income was 2.458 + 3.521 + 3.352 + 3.073 = $12.40 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 3.798 + 3.581 + 5.692 + 1.888 = $14.96 Mil.
|
Total Receivables was $4.01 Mil.
Revenue was 12.047 + 12.595 + 12.923 + 11.865 = $49.43 Mil.
Gross Profit was 12.047 + 12.595 + 12.923 + 11.865 = $49.43 Mil.
Total Current Assets was $291.05 Mil.
Total Assets was $1,143.38 Mil.
Property, Plant and Equipment(Net PPE) was $28.02 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.98 Mil.
Selling, General, & Admin. Expense(SGA) was $22.72 Mil.
Total Current Liabilities was $55.22 Mil.
Long-Term Debt & Capital Lease Obligation was $100.35 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) |
| = | (4.706 / 50.288) | / | (4.01 / 49.43) |
| = | 0.093581 | / | 0.081125 |
| | = | 1.1535 |
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) |
| = | (49.43 / 49.43) | / | (50.288 / 50.288) |
| = | 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 - (437.876 + 27.735) / 1274.258) | / | (1 - (291.046 + 28.021) / 1143.378) |
| = | 0.634602 | / | 0.720944 |
| | = | 0.8802 |
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 |
| = | 50.288 | / | 49.43 |
| | = | 1.0174 |
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)) |
| = | (0.978 / (0.978 + 28.021)) | / | (1.252 / (1.252 + 27.735)) |
| = | 0.033725 | / | 0.043192 |
| | = | 0.7808 |
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) |
| = | (23.905 / 50.288) | / | (22.722 / 49.43) |
| = | 0.475362 | / | 0.45968 |
| | = | 1.0341 |
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) |
| = | ((99.216 + 6.031) / 1274.258) | / | ((100.352 + 55.217) / 1143.378) |
| = | 0.082595 | / | 0.136061 |
| | = | 0.607 |
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 |
| = | (12.404 - 0 | - | 14.959) | / | 1274.258 |
| | = | -0.002005 |
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.
Kentucky Bancshares has a M-score of -2.28 suggests that the company is unlikely to be a manipulator.
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