NN Group NV 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 NN Group NV 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 * |
| = | |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Jun20) TTM: | Last Year (Mar19) TTM: |
Accounts Receivable was $1,045 Mil.
Revenue was 0 + 4558.8888888889 + 5916.2995594714 + 5029.3785310734 = $15,505 Mil.
Gross Profit was 0 + 4558.8888888889 + 5916.2995594714 + 5029.3785310734 = $15,505 Mil.
Total Current Assets was $148,106 Mil.
Total Assets was $295,348 Mil.
Property, Plant and Equipment(Net PPE) was $530 Mil.
Depreciation, Depletion and Amortization(DDA) was $123 Mil.
Selling, General, & Admin. Expense(SGA) was $0 Mil.
Total Current Liabilities was $3,515 Mil.
Long-Term Debt & Capital Lease Obligation was $12,916 Mil.
Net Income was 0 + 365.55555555556 + 567.18061674009 + 684.74576271186 = $1,617 Mil.
Non Operating Income was 0 + -35.555555555556 + 79.295154185022 + -82.485875706215 = $-39 Mil.
Cash Flow from Operations was 0 + -5255.5555555556 + 5099.1189427313 + 1201.1299435028 = $1,045 Mil.
|
Accounts Receivable was $1,482 Mil.
Revenue was 6959.3220338983 + 5287.827076223 + 5275.3792298716 + 5278.0373831776 = $22,801 Mil.
Gross Profit was 6959.3220338983 + 5287.827076223 + 5275.3792298716 + 5278.0373831776 = $22,801 Mil.
Total Current Assets was $135,844 Mil.
Total Assets was $267,320 Mil.
Property, Plant and Equipment(Net PPE) was $461 Mil.
Depreciation, Depletion and Amortization(DDA) was $203 Mil.
Selling, General, & Admin. Expense(SGA) was $0 Mil.
Total Current Liabilities was $3,758 Mil.
Long-Term Debt & Capital Lease Obligation was $12,237 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) |
| = | (1045.045045045 / 15504.566979434) | / | (1482.4858757062 / 22800.565723171) |
| = | 0.0674024 | / | 0.0650197 |
| | = | |
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) |
| = | (22800.565723171 / 22800.565723171) | / | (15504.566979434 / 15504.566979434) |
| = | 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 - (148105.85585586 + 530.40540540541) / 295347.97297297) | / | (1 - (135844.06779661 + 461.01694915254) / 267319.7740113) |
| = | 0.49674189 | / | 0.49010474 |
| | = | |
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 |
| = | 15504.566979434 | / | 22800.565723171 |
| | = | |
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)) |
| = | (202.66883712192 / (202.66883712192 + 461.01694915254)) | / | (122.5093539743 / (122.5093539743 + 530.40540540541)) |
| = | 0.30536866 | / | 0.18763453 |
| | = | |
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) |
| = | (0 / 15504.566979434) | / | (0 / 22800.565723171) |
| = | 0 | / | 0 |
| | = | |
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) |
| = | ((12915.540540541 + 3514.6396396396) / 295347.97297297) | / | ((12237.288135593 + 3758.1920903955) / 267319.7740113) |
| = | 0.05562991 | / | 0.0598365 |
| | = | |
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 |
| = | (1617.4819350075 - -38.746277076748 | - | 1044.6933306785) | / | 295347.97297297 |
| | = | 0.0021 |
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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