Shin-Etsu Chemical Co 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 Shin-Etsu Chemical Co 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 indicated in the company's associated stock exchange currency.
| This Year (Dec20) TTM: | Last Year (Dec19) TTM: |
Accounts Receivable was $3,413 Mil.
Revenue was 3659.9091287458 + 3325.9809260434 + 3340.2585282148 + 3431.9983876256 = $13,758 Mil.
Gross Profit was 1325.5237236404 + 1229.6640748563 + 1191.1242240528 + 1134.745647007 = $4,881 Mil.
Total Current Assets was $17,359 Mil.
Total Assets was $31,346 Mil.
Property, Plant and Equipment(Net PPE) was $11,230 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $0 Mil.
Total Current Liabilities was $2,983 Mil.
Long-Term Debt & Capital Lease Obligation was $137 Mil.
Net Income was 703.45256813417 + 672.3617043442 + 644.29410419583 + 624.06134453079 = $2,644 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 0 = $0 Mil.
|
Accounts Receivable was $3,291 Mil.
Revenue was 3551.470655631 + 3722.6241398549 + 3573.7610867181 + 3483.7054171919 = $14,332 Mil.
Gross Profit was 1332.6825601965 + 1323.5075320811 + 1349.5236817389 + 1072.9745025161 = $5,079 Mil.
Total Current Assets was $16,181 Mil.
Total Assets was $28,453 Mil.
Property, Plant and Equipment(Net PPE) was $9,660 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $0 Mil.
Total Current Liabilities was $3,141 Mil.
Long-Term Debt & Capital Lease Obligation was $124 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) |
| = | (3412.76860587 / 13758.14697063) | / | (3290.5472910422 / 14331.561299396) |
| = | 0.24805438 | / | 0.22960145 |
| | = | |
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) |
| = | (5078.6882765326 / 14331.561299396) | / | (4881.0576695565 / 13758.14697063) |
| = | 0.3543709 | / | 0.35477581 |
| | = | |
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 - (17358.644715748 + 11229.604066469) / 31345.977463312) | / | (1 - (16181.006590224 + 9660.1681011173) / 28453.442223261) |
| = | 0.08797712 | / | 0.09180849 |
| | = | |
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 |
| = | 13758.14697063 | / | 14331.561299396 |
| | = | |
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 / (0 + 9660.1681011173)) | / | (0 / (0 + 11229.604066469)) |
| = | 0 | / | 0 |
| | = | |
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 / 13758.14697063) | / | (0 / 14331.561299396) |
| = | 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) |
| = | ((137.46300406955 + 2983.0859230485) / 31345.977463312) | / | ((123.91270474148 + 3140.8328062988) / 28453.442223261) |
| = | 0.09955181 | / | 0.11473991 |
| | = | |
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 |
| = | (2644.169721205 - 0 | - | 0) | / | 31345.977463312 |
| | = | 0.0844 |
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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