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 * 1.3851 | + | 0.115 * 1 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8343 | + | 4.679 * -0.063948 | - | 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 HK$0 Mil.
Revenue was 128469.27 + 138755.696 + 166057.011 + 486713.749 = HK$919,996 Mil.
Gross Profit was 128469.27 + 138755.696 + 166057.011 + 486713.749 = HK$919,996 Mil.
Total Current Assets was HK$280,133 Mil.
Total Assets was HK$6,594,766 Mil.
Property, Plant and Equipment(Net PPE) was HK$58,945 Mil.
Depreciation, Depletion and Amortization(DDA) was HK$0 Mil.
Selling, General, & Admin. Expense(SGA) was HK$44,677 Mil.
Total Current Liabilities was HK$10,647 Mil.
Long-Term Debt & Capital Lease Obligation was HK$15,348 Mil.
Net Income was 22425.607 + 5360.61 + 56.853 + -7234.265 = HK$20,609 Mil.
Non Operating Income was 2600.606 + 4622.31 + 2509.059 + 2536.477 = HK$12,268 Mil.
Cash Flow from Operations was 199617.671 + 53430.005 + 87077.97 + 89938.293 = HK$430,064 Mil.
|
Total Receivables was HK$146,033 Mil.
Revenue was 116879.101 + 142614.52 + 192433.585 + 212276.851 = HK$664,204 Mil.
Gross Profit was 116879.101 + 142614.52 + 192433.585 + 212276.851 = HK$664,204 Mil.
Total Current Assets was HK$2,439,669 Mil.
Total Assets was HK$6,221,858 Mil.
Property, Plant and Equipment(Net PPE) was HK$62,797 Mil.
Depreciation, Depletion and Amortization(DDA) was HK$0 Mil.
Selling, General, & Admin. Expense(SGA) was HK$38,660 Mil.
Total Current Liabilities was HK$233,620 Mil.
Long-Term Debt & Capital Lease Obligation was HK$55,927 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 / 919995.726) | / | (146032.815 / 664204.057) |
| = | 0 | / | 0.219861 |
| | = | 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) |
| = | (664204.057 / 664204.057) | / | (919995.726 / 919995.726) |
| = | 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 - (280133.249 + 58944.89) / 6594765.645) | / | (1 - (2439669.001 + 62797.345) / 6221857.629) |
| = | 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 |
| = | 919995.726 | / | 664204.057 |
| | = | 1.3851 |
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 + 62797.345)) | / | (0 / (0 + 58944.89)) |
| = | 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) |
| = | (44676.669 / 919995.726) | / | (38659.91 / 664204.057) |
| = | 0.048562 | / | 0.058205 |
| | = | 0.8343 |
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) |
| = | ((15348.353 + 10646.841) / 6594765.645) | / | ((55926.928 + 233620.384) / 6221857.629) |
| = | 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 |
| = | (20608.805 - 12268.452 | - | 430063.939) | / | 6594765.645 |
| | = | -0.063948 |
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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