Full Description

- Based on the original Beneish paper
- Our version of DEPI uses Dep&Amort. See more details in the DEPI documentation
- This factor is computed on-the-fly. Overusing it as in the ranking, rules, etc, will make your simulations slower. See each component's documentation for details of actual implementation.

M-Score= | -4.84 + 0.92*DRI + 0.528*GMI + 0.404*AQI + 0.892*SGI
+0.115*DEPI - 0.172*SGAI - 0.327*LVGI + 4.679*TATA |

The model is framed such that higher numerical M-Score scores are associated with increased probability of manipulation. Beneish's papers suggest three possible cutoff scores based on the investor's expectation of the cost of erroneously failing to identify a manipulator (i.e. if an investor presumes it would take normal returns from 40 investments in non-manipulative companies to offset the loss likely to be experienced from an erroneous investment in one company that is later exposed as having manipulated results, we'd described the cost of error as 40:1). The cutoff scores are as follows:

Presumed Cost of Error |
Assume company is a potential Manipulator if |

40:1 | BeneishMScore > -1.49 |

20:1 | BeneishMScore > -1.78 |

10:1 | BeneishMScore > -1.89 |

NOTE: Beneish M-Score famously flagged Enron (Ticker "ENRNQ^04") as a manipulator. Around July 2001 the M-Score was around -0.6 indicating a high probability of manipulation

BeneishMScore MScoreAQI MScoreDEPAMI MScoreDEPI MScoreDSRI MScoreGMI MScoreLVGI MScoreSGAI MScoreSGAI MScoreTATA