Beneish m-score
A score estimating the probability of earnings manipulation from eight variables, such as receivables growth against sales, gross margin and accruals. Higher means more likely; it flags companies to examine, not proof.
Where you will meet it
Beneish m-score appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Explain the process for judging how good a company's financial reports are
“Screening models such as the Beneish M-score for manipulation and the Altman Z-score for bankruptcy risk help rank companies.”
- Judge how good a company's financial reports are
“The Beneish model combines such signals: a days sales in receivables index above 1, gross margin index above 1, asset quality index above 1 and high accruals raise the M-score, and a score above about −1.78 suggests likely manipulation.”
See also
Practise it
Practise beneish m-score until it is automatic: questions that explain every wrong option.
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