ORIX 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 ORIX 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 * 0.9852 | + | 0.528 * 1 | + | 0.404 * 0.9881 | + | 0.892 * 1.0518 | + | 0.115 * 4.1144 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0276 | + | 4.679 * 0.004841 | - | 0.327 * 1.0066 |
| = | -2.08 |
* 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 (Dec24) TTM: | Last Year (Dec23) TTM: |
Total Receivables was 円1,594,997 Mil.
Revenue was 499010 + 363313 + 526273 + 489718 = 円1,878,314 Mil.
Gross Profit was 499010 + 363313 + 526273 + 489718 = 円1,878,314 Mil.
Total Current Assets was 円0 Mil.
Total Assets was 円16,917,024 Mil.
Property, Plant and Equipment(Net PPE) was 円2,993,682 Mil.
Depreciation, Depletion and Amortization(DDA) was 円90,707 Mil.
Selling, General, & Admin. Expense(SGA) was 円1,448,735 Mil.
Total Current Liabilities was 円0 Mil.
Long-Term Debt & Capital Lease Obligation was 円5,767,687 Mil.
Net Income was 88831 + 96211 + 86735 + 126927 = 円398,704 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = 円0 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 316816 = 円316,816 Mil.
|
Total Receivables was 円1,539,132 Mil.
Revenue was 424520 + 434933 + 506574 + 419713 = 円1,785,740 Mil.
Gross Profit was 424520 + 434933 + 506574 + 419713 = 円1,785,740 Mil.
Total Current Assets was 円0 Mil.
Total Assets was 円15,769,189 Mil.
Property, Plant and Equipment(Net PPE) was 円2,633,938 Mil.
Depreciation, Depletion and Amortization(DDA) was 円362,567 Mil.
Selling, General, & Admin. Expense(SGA) was 円1,340,396 Mil.
Total Current Liabilities was 円0 Mil.
Long-Term Debt & Capital Lease Obligation was 円5,341,341 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) |
| = | (1594997 / 1878314) | / | (1539132 / 1785740) |
| = | 0.849164 | / | 0.861902 |
| | = | 0.9852 |
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) |
| = | (1785740 / 1785740) | / | (1878314 / 1878314) |
| = | 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 - (0 + 2993682) / 16917024) | / | (1 - (0 + 2633938) / 15769189) |
| = | 0.823037 | / | 0.832969 |
| | = | 0.9881 |
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 |
| = | 1878314 | / | 1785740 |
| | = | 1.0518 |
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)) |
| = | (362567 / (362567 + 2633938)) | / | (90707 / (90707 + 2993682)) |
| = | 0.120997 | / | 0.029408 |
| | = | 4.1144 |
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) |
| = | (1448735 / 1878314) | / | (1340396 / 1785740) |
| = | 0.771295 | / | 0.750611 |
| | = | 1.0276 |
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) |
| = | ((5767687 + 0) / 16917024) | / | ((5341341 + 0) / 15769189) |
| = | 0.34094 | / | 0.33872 |
| | = | 1.0066 |
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 |
| = | (398704 - 0 | - | 316816) | / | 16917024 |
| | = | 0.004841 |
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.
ORIX has a M-score of -2.08 suggests that the company is unlikely to be a manipulator.
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