China Life Insurance 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 China Life Insurance 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 | + | 0.528 * 1 | + | 0.404 * 1.5868 | + | 0.892 * 1.3865 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8333 | + | 4.679 * -0.063933 | - | 0.327 * 0.0847 |
| = | -2.79 |
* 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 $0 Mil.
Revenue was 16421.995 + 17766.869 + 21211.855 + 62136.314 = $117,537 Mil.
Gross Profit was 16421.995 + 17766.869 + 21211.855 + 62136.314 = $117,537 Mil.
Total Current Assets was $35,809 Mil.
Total Assets was $842,997 Mil.
Property, Plant and Equipment(Net PPE) was $7,535 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $5,709 Mil.
Total Current Liabilities was $1,361 Mil.
Long-Term Debt & Capital Lease Obligation was $1,962 Mil.
Net Income was 2866.625 + 686.395 + 7.262 + -923.562 = $2,637 Mil.
Non Operating Income was 332.431 + 591.86 + 320.503 + 323.819 = $1,569 Mil.
Cash Flow from Operations was 25516.767 + 6841.405 + 11123.2 + 11481.973 = $54,963 Mil.
|
Total Receivables was $18,606 Mil.
Revenue was 14891.524 + 18318.201 + 24515.706 + 27048.184 = $84,774 Mil.
Gross Profit was 14891.524 + 18318.201 + 24515.706 + 27048.184 = $84,774 Mil.
Total Current Assets was $310,837 Mil.
Total Assets was $792,725 Mil.
Property, Plant and Equipment(Net PPE) was $8,001 Mil.
Depreciation, Depletion and Amortization(DDA) was $0 Mil.
Selling, General, & Admin. Expense(SGA) was $4,941 Mil.
Total Current Liabilities was $29,765 Mil.
Long-Term Debt & Capital Lease Obligation was $7,126 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) |
| = | (0 / 117537.033) | / | (18605.988 / 84773.615) |
| = | 0 | / | 0.219479 |
| | = | 0 |
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) |
| = | (84773.615 / 84773.615) | / | (117537.033 / 117537.033) |
| = | 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 - (35808.929 + 7534.819) / 842997.015) | / | (1 - (310837.337 + 8000.987) / 792724.608) |
| = | 0.948584 | / | 0.597794 |
| | = | 1.5868 |
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 |
| = | 117537.033 | / | 84773.615 |
| | = | 1.3865 |
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 + 8000.987)) | / | (0 / (0 + 7534.819)) |
| = | 0 | / | 0 |
| | = | 1 |
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) |
| = | (5709.41 / 117537.033) | / | (4941.327 / 84773.615) |
| = | 0.048575 | / | 0.058289 |
| | = | 0.8333 |
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) |
| = | ((1961.952 + 1360.966) / 842997.015) | / | ((7125.629 + 29765.488) / 792724.608) |
| = | 0.003942 | / | 0.046537 |
| | = | 0.0847 |
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 |
| = | (2636.72 - 1568.613 | - | 54963.345) | / | 842997.015 |
| | = | -0.063933 |
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.
China Life Insurance Co has a M-score of -2.79 suggests that the company is unlikely to be a manipulator.
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