Incar Financial Service 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 Incar Financial Service 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 * 1.0337 | + | 0.528 * 1.0159 | + | 0.404 * 0.9995 | + | 0.892 * 1.387 | + | 0.115 * 0.9512 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9135 | + | 4.679 * 0.041849 | - | 0.327 * 1.0707 |
| = | -1.91 |
* 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 ₩77,194 Mil.
Revenue was 164336.715 + 147457.568 + 128219.299 + 116808.785 = ₩556,822 Mil.
Gross Profit was 33429.139 + 26029.824 + 22138.462 + 24266.195 = ₩105,864 Mil.
Total Current Assets was ₩428,681 Mil.
Total Assets was ₩497,329 Mil.
Property, Plant and Equipment(Net PPE) was ₩11,794 Mil.
Depreciation, Depletion and Amortization(DDA) was ₩12,330 Mil.
Selling, General, & Admin. Expense(SGA) was ₩13,271 Mil.
Total Current Liabilities was ₩333,280 Mil.
Long-Term Debt & Capital Lease Obligation was ₩38,279 Mil.
Net Income was 9854.388 + 6171.907 + 5168.924 + 8314.062 = ₩29,509 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = ₩0 Mil.
Cash Flow from Operations was -2611.716 + 14191.083 + 2828.465 + -5711.245 = ₩8,697 Mil.
|
Total Receivables was ₩53,840 Mil.
Revenue was 110974.902 + 103228.623 + 97274.033 + 89971.028 = ₩401,449 Mil.
Gross Profit was 21285.09 + 20485.693 + 18906.524 + 16856.802 = ₩77,534 Mil.
Total Current Assets was ₩246,917 Mil.
Total Assets was ₩291,945 Mil.
Property, Plant and Equipment(Net PPE) was ₩11,636 Mil.
Depreciation, Depletion and Amortization(DDA) was ₩11,009 Mil.
Selling, General, & Admin. Expense(SGA) was ₩10,474 Mil.
Total Current Liabilities was ₩201,339 Mil.
Long-Term Debt & Capital Lease Obligation was ₩2,366 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) |
| = | (77193.594 / 556822.367) | / | (53840.435 / 401448.586) |
| = | 0.138632 | / | 0.134115 |
| | = | 1.0337 |
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) |
| = | (77534.109 / 401448.586) | / | (105863.62 / 556822.367) |
| = | 0.193136 | / | 0.190121 |
| | = | 1.0159 |
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 - (428680.945 + 11794.173) / 497329.114) | / | (1 - (246916.848 + 11635.735) / 291944.519) |
| = | 0.114319 | / | 0.114378 |
| | = | 0.9995 |
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 |
| = | 556822.367 | / | 401448.586 |
| | = | 1.387 |
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)) |
| = | (11008.909 / (11008.909 + 11635.735)) | / | (12329.638 / (12329.638 + 11794.173)) |
| = | 0.48616 | / | 0.511098 |
| | = | 0.9512 |
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) |
| = | (13270.568 / 556822.367) | / | (10474.341 / 401448.586) |
| = | 0.023833 | / | 0.026091 |
| | = | 0.9135 |
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) |
| = | ((38279.146 + 333280.034) / 497329.114) | / | ((2366.148 + 201339.359) / 291944.519) |
| = | 0.747109 | / | 0.697754 |
| | = | 1.0707 |
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 |
| = | (29509.281 - 0 | - | 8696.587) | / | 497329.114 |
| | = | 0.041849 |
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.
Incar Financial Service Co has a M-score of -1.91 suggests that the company is unlikely to be a manipulator.
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