Central Reinsurance 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 Central Reinsurance 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 * 1.287 | + | 0.528 * 1 | + | 0.404 * 1.0005 | + | 0.892 * 1.0785 | + | 0.115 * 0.9277 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.228 | + | 4.679 * 0.139764 | - | 0.327 * 0.6061 |
| = | -1.41 |
* 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 NT$446 Mil.
Revenue was 6377.761 + 5318.045 + 5692.642 + 5527.477 = NT$22,916 Mil.
Gross Profit was 6377.761 + 5318.045 + 5692.642 + 5527.477 = NT$22,916 Mil.
Total Current Assets was NT$0 Mil.
Total Assets was NT$56,472 Mil.
Property, Plant and Equipment(Net PPE) was NT$288 Mil.
Depreciation, Depletion and Amortization(DDA) was NT$27 Mil.
Selling, General, & Admin. Expense(SGA) was NT$684 Mil.
Total Current Liabilities was NT$0 Mil.
Long-Term Debt & Capital Lease Obligation was NT$1 Mil.
Net Income was 1070.501 + 551.049 + 359.513 + 527.404 = NT$2,508 Mil.
Non Operating Income was 748.052 + -787.712 + 604.119 + 306.704 = NT$871 Mil.
Cash Flow from Operations was -2277.558 + -1955.702 + -2601.323 + 579.209 = NT$-6,255 Mil.
|
Total Receivables was NT$321 Mil.
Revenue was 5440.044 + 4774.456 + 4939.28 + 6094.906 = NT$21,249 Mil.
Gross Profit was 5440.044 + 4774.456 + 4939.28 + 6094.906 = NT$21,249 Mil.
Total Current Assets was NT$0 Mil.
Total Assets was NT$51,453 Mil.
Property, Plant and Equipment(Net PPE) was NT$289 Mil.
Depreciation, Depletion and Amortization(DDA) was NT$25 Mil.
Selling, General, & Admin. Expense(SGA) was NT$517 Mil.
Total Current Liabilities was NT$0 Mil.
Long-Term Debt & Capital Lease Obligation was NT$2 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) |
| = | (445.678 / 22915.925) | / | (321.079 / 21248.686) |
| = | 0.019448 | / | 0.015111 |
| | = | 1.287 |
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) |
| = | (21248.686 / 21248.686) | / | (22915.925 / 22915.925) |
| = | 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 - (0 + 287.663) / 56471.5) | / | (1 - (0 + 288.719) / 51453.22) |
| = | 0.994906 | / | 0.994389 |
| | = | 1.0005 |
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 |
| = | 22915.925 | / | 21248.686 |
| | = | 1.0785 |
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)) |
| = | (25.207 / (25.207 + 288.719)) | / | (27.258 / (27.258 + 287.663)) |
| = | 0.080296 | / | 0.086555 |
| | = | 0.9277 |
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) |
| = | (684.075 / 22915.925) | / | (516.54 / 21248.686) |
| = | 0.029852 | / | 0.024309 |
| | = | 1.228 |
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) |
| = | ((1.154 + 0) / 56471.5) | / | ((1.692 + 0) / 51453.22) |
| = | 2.0E-5 | / | 3.3E-5 |
| | = | 0.6061 |
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 |
| = | (2508.467 - 871.163 | - | -6255.374) | / | 56471.5 |
| | = | 0.139764 |
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.
Central Reinsurance has a M-score of -1.41 signals that the company is likely to be a manipulator.
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