WSFS Financial 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 WSFS Financial 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 * 1.0511 | + | 0.528 * 1 | + | 0.404 * 1.0108 | + | 0.892 * 1.0988 | + | 0.115 * 1.0826 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9466 | + | 4.679 * 0.001561 | - | 0.327 * 1.244 |
| = | -2.39 |
* 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 (Dec23) TTM: | Last Year (Dec22) TTM: |
Total Receivables was $86 Mil.
Revenue was 265.332 + 255.27 + 248.177 + 245.659 = $1,014 Mil.
Gross Profit was 265.332 + 255.27 + 248.177 + 245.659 = $1,014 Mil.
Total Current Assets was $5,025 Mil.
Total Assets was $20,595 Mil.
Property, Plant and Equipment(Net PPE) was $104 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General, & Admin. Expense(SGA) was $316 Mil.
Total Current Liabilities was $47 Mil.
Long-Term Debt & Capital Lease Obligation was $895 Mil.
Net Income was 63.908 + 74.166 + 68.678 + 62.404 = $269 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -50.804 + 165.249 + 92.367 + 30.191 = $237 Mil.
|
Total Receivables was $74 Mil.
Revenue was 258.766 + 239.482 + 225.87 + 199.132 = $923 Mil.
Gross Profit was 258.766 + 239.482 + 225.87 + 199.132 = $923 Mil.
Total Current Assets was $5,005 Mil.
Total Assets was $19,915 Mil.
Property, Plant and Equipment(Net PPE) was $116 Mil.
Depreciation, Depletion and Amortization(DDA) was $61 Mil.
Selling, General, & Admin. Expense(SGA) was $304 Mil.
Total Current Liabilities was $5 Mil.
Long-Term Debt & Capital Lease Obligation was $727 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) |
| = | (85.979 / 1014.438) | / | (74.448 / 923.25) |
| = | 0.084755 | / | 0.080637 |
| | = | 1.0511 |
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) |
| = | (923.25 / 923.25) | / | (1014.438 / 1014.438) |
| = | 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 - (5025.416 + 104.484) / 20594.672) | / | (1 - (5004.766 + 115.603) / 19914.755) |
| = | 0.750911 | / | 0.742886 |
| | = | 1.0108 |
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 |
| = | 1014.438 | / | 923.25 |
| | = | 1.0988 |
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)) |
| = | (60.543 / (60.543 + 115.603)) | / | (48.602 / (48.602 + 104.484)) |
| = | 0.343709 | / | 0.317482 |
| | = | 1.0826 |
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) |
| = | (315.79 / 1014.438) | / | (303.626 / 923.25) |
| = | 0.311296 | / | 0.328867 |
| | = | 0.9466 |
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) |
| = | ((895.076 + 46.684) / 20594.672) | / | ((726.894 + 5.174) / 19914.755) |
| = | 0.045728 | / | 0.03676 |
| | = | 1.244 |
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 |
| = | (269.156 - 0 | - | 237.003) | / | 20594.672 |
| | = | 0.001561 |
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.
WSFS Financial has a M-score of -2.39 suggests that the company is unlikely to be a manipulator.
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