Beneish M Score Template
Originally published: 01/06/2020 12:11
Publication number: ELQ-97266-1
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Beneish M Score Template

Detect Earnings Manipulation

The Beneish M-Score is a statistical model that uses financial ratios calculated with accounting ata of a specific company in order to check if it is likely (high probability) that the reported earnings of the company have been manipulated.

The objective of the spreadsheet is to detect potential earnings manipulation by input few financial figures. The spreadsheet is automated and will shows individual variable (total of 8 variables) and final findings.

The template is user-friendly and highly automated. You will expect to obtain the results within 5 to 15 minutes.

Beneish M-Score is created by Professor Messod Beneish, the M-Score is a mathematical model that uses eight financial ratios to identify whether a company has manipulated its earnings. The variables are constructed from the company's financial statements and create a score to describe the degree to which the earnings have been manipulated.

Beneish used all the companies in the Compustat database between 1982-1992. In his out of sample tests, Beneish found that he could correctly identify 76% of manipulators, whilst only incorrectly identifying 17.5% of non-manipulators.

In a 2007 paper - The Predictable Cost of Earnings Manipulation - Beneish examines the use of the M score as a stock selection technique (over the period 1993-2003). The M-score strategy apparently generated a hedged return of nearly 14% per annum.

Source: Business Insider

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  • Jin Liang Boey(last updated: 29/06/2021 08:19)
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