Beneish M-score (Beneish)
An eight-variable model that looks for the accounting patterns typical of earnings manipulation.
It asks a question nothing else on the page asks: are these numbers likely to have been managed?
How it is computed here
M = -4.84 + 0.920 DSRI + 0.528 GMI + 0.404 AQI + 0.892 SGI + 0.115 DEPI - 0.172 SGAI + 4.679 TATA - 0.327 LVGI
Computed across several filed fiscal years. Filed under health. Lower is the stronger reading, other things equal.
The readings, and where the lines come from
| Range | Reading |
|---|---|
| below -1.78 | Manipulation unlikely |
| -1.78 and above | Possible manipulator |
Beneish (1999), Financial Analysts Journal, the -1.78 cutoff.
When it misleads
- More negative is better here, which is the opposite of every other score on the page.
- It flags a statistical pattern, not fraud. Fast-growing companies trip it routinely and honestly.
- Needs two consecutive fiscal years; withheld when only one is on file.
- The stored value is clamped to a range of -10 to 5.
Questions
How is beneish m-score calculated?
M = -4.84 + 0.920 DSRI + 0.528 GMI + 0.404 AQI + 0.892 SGI + 0.115 DEPI - 0.172 SGAI + 4.679 TATA - 0.327 LVGI. Computed across several filed fiscal years.
What does beneish m-score tell a value investor?
It asks a question nothing else on the page asks: are these numbers likely to have been managed?
When does beneish m-score mislead?
More negative is better here, which is the opposite of every other score on the page. It flags a statistical pattern, not fraud. Fast-growing companies trip it routinely and honestly. Needs two consecutive fiscal years; withheld when only one is on file. The stored value is clamped to a range of -10 to 5.