JPMorgan Chase 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 JPMorgan Chase 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 * 0.9741 | + | 0.528 * 1 | + | 0.404 * 1.002 | + | 0.892 * 1.1049 | + | 0.115 * 0.9537 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.968 | + | 4.679 * 0.019919 | - | 0.327 * 1.0853 |
| = | -2.34 |
* 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 (Mar24) TTM: | Last Year (Mar23) TTM: |
Total Receivables was R$646,493 Mil.
Revenue was 208693.458 + 189132.28 + 196367.651 + 187265.453 = R$781,459 Mil.
Gross Profit was 208693.458 + 189132.28 + 196367.651 + 187265.453 = R$781,459 Mil.
Total Current Assets was R$4,567,896 Mil.
Total Assets was R$20,371,002 Mil.
Property, Plant and Equipment(Net PPE) was R$150,783 Mil.
Depreciation, Depletion and Amortization(DDA) was R$38,762 Mil.
Selling, General, & Admin. Expense(SGA) was R$260,102 Mil.
Total Current Liabilities was R$1,910,948 Mil.
Long-Term Debt & Capital Lease Obligation was R$1,971,363 Mil.
Net Income was 66823.936 + 45602.439 + 64948.844 + 70242.746 = R$247,618 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = R$0 Mil.
Cash Flow from Operations was -767676.008 + 295119.854 + 222829.205 + 91565.051 = R$-158,162 Mil.
|
Total Receivables was R$600,635 Mil.
Revenue was 199739.393 + 181029.245 + 171476.207 + 155009.819 = R$707,255 Mil.
Gross Profit was 199739.393 + 181029.245 + 171476.207 + 155009.819 = R$707,255 Mil.
Total Current Assets was R$4,400,355 Mil.
Total Assets was R$19,502,587 Mil.
Property, Plant and Equipment(Net PPE) was R$147,226 Mil.
Depreciation, Depletion and Amortization(DDA) was R$35,671 Mil.
Selling, General, & Admin. Expense(SGA) was R$243,183 Mil.
Total Current Liabilities was R$1,885,664 Mil.
Long-Term Debt & Capital Lease Obligation was R$1,539,084 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) |
| = | (646492.575 / 781458.842) | / | (600634.918 / 707254.664) |
| = | 0.827289 | / | 0.849248 |
| | = | 0.9741 |
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) |
| = | (707254.664 / 707254.664) | / | (781458.842 / 781458.842) |
| = | 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 - (4567895.842 + 150783.364) / 20371002.311) | / | (1 - (4400355.495 + 147226.288) / 19502587.023) |
| = | 0.768363 | / | 0.766822 |
| | = | 1.002 |
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 |
| = | 781458.842 | / | 707254.664 |
| | = | 1.1049 |
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)) |
| = | (35670.795 / (35670.795 + 147226.288)) | / | (38762.213 / (38762.213 + 150783.364)) |
| = | 0.195032 | / | 0.204501 |
| | = | 0.9537 |
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) |
| = | (260101.569 / 781458.842) | / | (243182.581 / 707254.664) |
| = | 0.332841 | / | 0.34384 |
| | = | 0.968 |
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) |
| = | ((1971363.385 + 1910948.451) / 20371002.311) | / | ((1539084.005 + 1885664.25) / 19502587.023) |
| = | 0.19058 | / | 0.175605 |
| | = | 1.0853 |
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 |
| = | (247617.965 - 0 | - | -158161.898) | / | 20371002.311 |
| | = | 0.019919 |
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.
JPMorgan Chase has a M-score of -2.34 suggests that the company is unlikely to be a manipulator.
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