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How to perform Beneish M Model

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RandomInvestor

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Hey guys so I am trying to perform this model for A2Milk to check if the company is manipulating their earnings. But there is no proper guide for it online. Could Best thing I found is this:

https://ycharts.com/glossary/terms/beneish_m_score
So these are the values I need to get:

For some reason below it shows "Salest" for example supposed to be little t. I have some questions what does that small t mean? Then it says t-1 ?

Days Receivable Index (DSRI) is:
DSRI = (Net Receivablest / Salest) / Net Receivablest-1 / Salest-1)

Gross Margin Index (GMI) is:
GMI = [(Salest-1 - COGSt-1) / Salest-1] / [(Salest - COGSt) / Salest]

Asset Quality Index (AQI) is:
AQI = [1 - (Current Assetst + PP&Et + Securitiest) / Total Assetst] / [1 - ((Current Assetst-1 + PP&Et-1 + Securitiest-1) / Total Assetst-1)]


Sales Growth Index (SGI) is:
SGI = Salest / Salest-1

Depreciation Index (DEPI) is:
DEPI = (Depreciationt-1/ (PP&Et-1 + Depreciationt-1)) / (Depreciationt / (PP&Et + Depreciationt))

SG&A Expense Index (SGAI) is:
SGAI = (SG&A Expenset / Salest) / (SG&A Expenset-1 / Salest-1)

Leverage index (LVGI) is:
LVGI = [(Current Liabilitiest + Total Long Term Debtt) / Total Assetst] / [(Current Liabilitiest-1 + Total Long Term Debtt-1) / Total Assetst-1]

Total Accruals to Total Assets (TATA) is:
TATA = (Income from Continuing Operationst - Cash Flows from Operationst) / Total Assetst
 
Wow

Is it really that complicated

Up---ride it and profit
Down---get out protect capital and profit
 
RandomInvestor said:
Hey guys so I am trying to perform this model for A2Milk to check if the company is manipulating their earnings. But there is no proper guide for it online. Could Best thing I found is this:

https://ycharts.com/glossary/terms/beneish_m_score
So these are the values I need to get:

For some reason below it shows "Salest" for example supposed to be little t. I have some questions what does that small t mean? Then it says t-1 ?

Days Receivable Index (DSRI) is:
DSRI = (Net Receivablest / Salest) / Net Receivablest-1 / Salest-1)

Gross Margin Index (GMI) is:
GMI = [(Salest-1 - COGSt-1) / Salest-1] / [(Salest - COGSt) / Salest]

Asset Quality Index (AQI) is:
AQI = [1 - (Current Assetst + PP&Et + Securitiest) / Total Assetst] / [1 - ((Current Assetst-1 + PP&Et-1 + Securitiest-1) / Total Assetst-1)]


Sales Growth Index (SGI) is:
SGI = Salest / Salest-1

Depreciation Index (DEPI) is:
DEPI = (Depreciationt-1/ (PP&Et-1 + Depreciationt-1)) / (Depreciationt / (PP&Et + Depreciationt))

SG&A Expense Index (SGAI) is:
SGAI = (SG&A Expenset / Salest) / (SG&A Expenset-1 / Salest-1)

Leverage index (LVGI) is:
LVGI = [(Current Liabilitiest + Total Long Term Debtt) / Total Assetst] / [(Current Liabilitiest-1 + Total Long Term Debtt-1) / Total Assetst-1]

Total Accruals to Total Assets (TATA) is:
TATA = (Income from Continuing Operationst - Cash Flows from Operationst) / Total Assetst
Click to expand...

Hi RandomInvestor

t = Time (Eg. Annual Accounts as at 30th June 2016) whereas t-1 = Time - 1 year as in this example (Eg. 30th June 2015)

Just picking one of the above as an example:-

Sales Growth Index (SGI) is:
SGI = Salest / Salest-1
Based on the line above this would read as follows:-
SGI = Sales(30-06-2016) / Sales(30-06-2015)
 
I find it funny you find this basic balance sheets stuff "complicated" (yes it's basic I only done year 11/12 accounting and I understand most of it) for trading/investing and yet you propose machine learning for trading/investing (in other thread).
 
I'm a duck.

You have un realistic expectations

Oh and I see you only "done" red neck English as well!
 
Last edited:
Apologies, forgot you are a duck. Should not have held any expectations of logic.
 
rnr said:
Hi RandomInvestor

t = Time (Eg. Annual Accounts as at 30th June 2016) whereas t-1 = Time - 1 year as in this example (Eg. 30th June 2015)

Just picking one of the above as an example:-

Sales Growth Index (SGI) is:
SGI = Salest / Salest-1
Based on the line above this would read as follows:-
SGI = Sales(30-06-2016) / Sales(30-06-2015)
Click to expand...
Thanks Rnr
 
I certainly understand

One day when you trade OR invest you'll get it!

Crunching figures can be fun but procrastination
And trading paralysis through analysis just wastes
Time.

You can do nothing by simply doing nothing.
You may have noticed that no matter how hard you grind down into a company it will
Do what it does in spite of your opinion after analysis.
Often in complete contrast to what it " Should do "

Analysis---any sort
Is nothing more than an indication of " likely " company health and or price direction
It's how you MANAGE your investments or trades which determine performance
( discretionary investing/trading ).

The thing I like about A2M is it's move into the US.
Even a duck knows that's a big market.
 
luckily there is more than one way to pluck a duck, so while speculating/trading on price action may work for a % of people, there are others who choose to be investors and understand the business they become a part owner of.

Most studies suggest almost no traders/speculators will be successful in the long run and not many investors will have outperformance of their benchmarks either.

Its probably fair to say that nearly everyone would be better just buying ETFs and tracking indicies, of course the fact that all of us ducks are here on ASF implies that we hope to be amongst the outliers of the bell curves, on the positive edge, whatever our strategy is.
 
RandomInvestor, two examples here (no reflection on any of the posters involved) but a good example of what tech/a is saying (you may eventually learn that the duck is actually here to help you, it may cost you a few $$$ first though).

Links below are to the last two pages as examples in both cases. In the first one admittedly it is only one stock but it does show how all the effort and calculations mean nothing if you ignore reality.

Here is an example of where you can analyse all you want but how do you know the (already out of date when you it anyway) analytic data is not BS.
(also worth reading the posts and comparing the weekly chart price and volume around the time of each post - not everyone was in the dark)
https://www.aussiestockforums.com/threads/qin-quintis-limited.8695/page-6

Then we look at another way of doing it, inputs are reality, no theory unless there is something obvious that may price action in the direction you have identified.
https://www.aussiestockforums.com/threads/asx-momentum-trade-book-part-2.29971/page-45

I have yet to see anything in the former that comes close to the latter for outcome, consistencey or simplicity.
 
...and ever the religious debates continue! I dont know what the answer is, once again the thread is basically being hijacked by those from a different 'religion'. I tried the light hearted approach, but there are still those that insist their way is the true way - despite the reality of the statistics.

I suspect I have been guilty of posting in the trading/speculating threads in the past, maybe we should all try and be a bit more disciplined about not dragging threads off topic, or adding to off topic commentary?
 
Can you point me to a fundi trading method demonstrated here which is performing as well as Petes!

Don't tell me Buffett
I'll puke
 
galumay said:
...and ever the religious debates continue! I dont know what the answer is, once again the thread is basically being hijacked by those from a different 'religion'. I tried the light hearted approach, but there are still those that insist their way is the true way - despite the reality of the statistics.

I suspect I have been guilty of posting in the trading/speculating threads in the past, maybe we should all try and be a bit more disciplined about not dragging threads off topic, or adding to off topic commentary?
Click to expand...

I guess you are referring to my post.

All that I am attempting to do is get the OP to look at examples from both sides.
There is no need for him to go outside of this site to do that and in the links I have provided there are two extremes of both ways.

It is up to the OP to decide which he/she wants to follow, just provide the opportunity to compare both extremes, work towards the middle and then work out what they feel is best for their situation.

The original question was "Hey guys so I am trying to perform this model for A2Milk to check if the company is manipulating their earnings. But there is no proper guide for it online."

The intention is to give the OP the option of looking at it another way which some of us on here have done to significant advantage without having to give a rats about whether it is manipulated or not.

I am not going to marry the flamin thing, I don't want its family history, just a short "friends with benefits" relationship will do nicely thanks :).
 
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