From the original Beneish paper

SGI is the ratio of sales in year t to sales in year t-1. Growth does not imply manipulation, but growth firms are viewed by professionals as more likely to commit financial statement fraud because their financial position and capital needs put pressure on managers to achieve earnings targets. In addition, concerns about controls and reporting tend to lag behind operations in periods of high growth. If growth firms face large stock prices losses at the first indication of a slowdown, they may have greater incentives to manipulate earnings. To this effect, Fridson (1993, pp. 7-8) states: "Almost invariably, companies try to dispel the impression that their growth is decelerating, since that perception can be so costly to them." I thus expect a positive relation between SGI and the probability of earnings manipulation.

Beneish Formula

Sales{t} / Sales{t-1}

Our Formula

SalesTTM/SalesPTM

NOTE: There's no fallback with Sales since it should always be there even during preliminary reports

Related Factors:

BeneishMScore MScoreAQI MScoreDEPAMI MScoreDEPI MScoreDSRI MScoreGMI MScoreLVGI MScoreSGAI MScoreSGAI MScoreTATA