Scoring model · also called M-score

    Beneish M-score

    The Beneish M-score combines eight indices, built from two years of financial statements, into one number that Messod Beneish used to identify companies more likely to have manipulated their reported earnings.

    Beneish M-score = −4.84 + 0.92 × Days sales in receivables index (DSRI) + 0.53 × Gross margin index (GMI) + 0.4 × Asset quality index (AQI) + 0.89 × Sales growth index (SGI) + 0.12 × Depreciation index (DEPI) + −0.17 × Sales, general and administrative expenses index (SGAI) + 4.68 × Total accruals to total assets (TATA) + −0.33 × Leverage index (LVGI)

    Beneish M-score calculator

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    Net sales for the period: total sales minus returns, allowances and discounts.

    Net sales for the prior year.

    The direct cost of the goods or services sold during the period (also called cost of sales).

    Cost of goods sold for the prior year.

    Selling, general and administrative expenses for the year.

    Selling, general and administrative expenses for the prior year.

    The period's expense for the wear and use of tangible assets such as equipment and buildings.

    Depreciation expense for the prior year.

    Net income before the results of discontinued operations. For most businesses it equals net income. Enter a loss as a negative number.

    Net cash from operating activities, from the cash flow statement. Enter an outflow as a negative number.

    Amounts customers owe for goods or services already delivered, at the end of the period.

    Net accounts receivable at the end of the prior year.

    Assets expected to be turned into cash or used up within a year: cash, receivables, inventory and similar items.

    Current assets at the end of the prior year.

    Property, plant and equipment after accumulated depreciation, at the end of the year.

    Net property, plant and equipment at the end of the prior year.

    Investments in securities held as non-current assets, at the end of the year. Enter 0 if there are none.

    Long-term investments at the end of the prior year. Enter 0 if there were none.

    Everything the business owns, at the end of the period.

    Total assets on the prior year's balance sheet, which is also the start of the current year.

    Obligations due within a year, such as accounts payable, short-term borrowings and the current portion of long-term debt.

    Current liabilities at the end of the prior year.

    Borrowing due after more than a year, at the end of the year. Enter 0 if there is none.

    Long-term debt at the end of the prior year. Enter 0 if there was none.

    Example figures

    Beneish M-score

    −2.73

    The M-score is −2.73.

    How it was calculated

    1. Days sales in receivables index (DSRI) = 140,000 ÷ 1,600,000 ÷ (133,000 ÷ 1,520,000) = 1.0000
    2. Gross margin index (GMI) = (1,520,000 − 955,000) ÷ 1,520,000 ÷ ((1,600,000 − 1,000,000) ÷ 1,600,000) = 0.9912
    3. Asset quality index (AQI) = (1 − (480,000 + 520,000 + 30,000) ÷ 1,060,000) ÷ (1 − (455,000 + 495,000 + 30,000) ÷ 1,010,000) = 0.9528
    4. Sales growth index (SGI) = 1,600,000 ÷ 1,520,000 = 1.0526
    5. Depreciation index (DEPI) = 56,000 ÷ (56,000 + 495,000) ÷ (60,000 ÷ (60,000 + 520,000)) = 0.9825
    6. Sales, general and administrative expenses index (SGAI) = 300,000 ÷ 1,600,000 ÷ (288,000 ÷ 1,520,000) = 0.9896
    7. Total accruals to total assets (TATA) = (109,000 − 175,000) ÷ 1,060,000 = −0.0623
    8. Leverage index (LVGI) = (250,000 + 300,000) ÷ 1,060,000 ÷ ((240,000 + 310,000) ÷ 1,010,000) = 0.9528
    9. Beneish M-score = −4.84 + 0.92 × 1 + 0.53 × 0.9912 + 0.4 × 0.9528 + 0.89 × 1.0526 + 0.12 × 0.9825 + −0.17 × 0.9896 + 4.68 × (−0.0623) + −0.33 × 0.9528 = −2.73

    Messod Beneish's model combines eight indices that rose in companies later found to have manipulated their earnings. A higher score means the statements look more like those companies'; it is a reason to read further, not proof.

    Where the figures come from

    Where the figures come from

    Balance sheet

    Accounts receivable $140,000

    Accounts receivable, prior year $133,000

    Current assets $480,000

    Current assets, prior year $455,000

    Property, plant and equipment, net $520,000

    Property, plant and equipment, net, prior year $495,000

    Long-term investments $30,000

    Long-term investments, prior year $30,000

    Total assets $1,060,000

    Total assets at the end of the prior year $1,010,000

    Current liabilities $250,000

    Current liabilities, prior year $240,000

    Long-term debt $300,000

    Long-term debt, prior year $310,000

    Income statement

    Revenue $1,600,000

    Revenue, prior year $1,520,000

    Cost of goods sold $1,000,000

    Cost of goods sold, prior year $955,000

    Selling, general and administrative expenses $300,000

    Selling, general and administrative expenses, prior year $288,000

    Depreciation $60,000

    Depreciation, prior year $56,000

    Income from continuing operations $109,000

    Cash flow statement

    Cash flow from operations $175,000

    Beneish M-score =

    −4.84+0.92×Days sales in receivables index (DSRI)1.0000+0.53×Gross margin index (GMI)0.9912+0.4×Asset quality index (AQI)0.9528+0.89×Sales growth index (SGI)1.0526+0.12×Depreciation index (DEPI)0.9825+−0.17×Sales, general and administrative expenses index (SGAI)0.9896+4.68×Total accruals to total assets (TATA)−0.0623+−0.33×Leverage index (LVGI)0.9528

    = −2.73

    Using Revenue $1,600,000, Revenue, prior year $1,520,000, Cost of goods sold $1,000,000, Cost of goods sold, prior year $955,000, Selling, general and administrative expenses $300,000, Selling, general and administrative expenses, prior year $288,000, Depreciation $60,000, Depreciation, prior year $56,000, Income from continuing operations $109,000, Cash flow from operations $175,000, Accounts receivable $140,000, Accounts receivable, prior year $133,000, Current assets $480,000, Current assets, prior year $455,000, Property, plant and equipment, net $520,000, Property, plant and equipment, net, prior year $495,000, Long-term investments $30,000, Long-term investments, prior year $30,000, Total assets $1,060,000, Total assets at the end of the prior year $1,010,000, Current liabilities $250,000, Current liabilities, prior year $240,000, Long-term debt $300,000, Long-term debt, prior year $310,000, the beneish m-score is −2.73.

    What the M-score measures

    Messod Beneish published the model in 1999. He compared companies identified through SEC enforcement actions and press reports as having manipulated their earnings with other companies, and found eight measures that had moved differently in the year the manipulation began. The M-score combines them, each with its own weight.

    Most indices divide this year’s ratio by last year’s, so a value near 1 means little changed. The score needs two years of figures.

    The eight indices

    • DSRI, days sales in receivables. Receivables relative to sales, against last year. A sharp rise can mean sales recorded before customers are really committed.
    • GMI, gross margin. Last year’s gross margin divided by this year’s, so it rises when margins fall. Falling margins can put pressure on managers.
    • AQI, asset quality. The share of assets other than current assets, property and equipment, and securities: mostly intangibles and deferred costs. A rise can mean more costs are being capitalized.
    • SGI, sales growth. Growth is not manipulation, but fast-growing companies face more pressure to keep growing.
    • DEPI, depreciation. Last year’s depreciation rate divided by this year’s; above 1 when assets are being depreciated more slowly.
    • SGAI, selling, general and administrative expenses. SG&A relative to sales, against last year. It carries a negative weight in the model.
    • TATA, total accruals to total assets. Income from continuing operations minus cash flow from operations, relative to total assets: earnings not yet backed by cash.
    • LVGI, leverage. Debt relative to assets, against last year. It also carries a negative weight.

    Reading the score

    Beneish treated scores above −1.78 as a sign of possible manipulation. A score above that cut-off means the statements look more like those of the manipulators in his sample; it does not show that anything improper happened. Fast growth, an acquisition or a change in the business can push several indices up at once.

    Some sources quote a cut-off of −2.22. The −1.78 figure is the one Beneish’s 1999 paper gives for this eight-variable model, and the one the calculator uses.

    What the M-score does not show

    • It is a screen, not evidence. Many companies above the cut-off have done nothing wrong, and some manipulators score below it.
    • It was built on US public companies, and it is not meant for banks and insurers.
    • It needs two years of comparable statements; a restatement or a large acquisition between them distorts most indices.
    • Each index is a ratio of ratios, so a small figure in the prior year can produce a very large index.

    Common mistakes

    • Using net income including discontinued operations for TATA, instead of income from continuing operations.
    • Mixing gross and net receivables between the two years.
    • Reading the score as a finding of fraud rather than a reason to read the notes and the cash flow statement more closely.

    Two indices start from ratios with their own pages: days sales outstanding and gross profit margin. The Piotroski F-score includes a similar check on earnings against cash flow, and the Altman Z-score looks at the risk of financial distress.

    To keep the calculation, download the Beneish M-score template for Excel or Google Sheets.

    Definitions and variations

    • The coefficients are those of Beneish's eight-variable model (1999). Some sources quote a cut-off of −2.22; the paper's cut-off for this model is −1.78.

    Read it alongside

    • Piotroski F-score also uses revenue, revenue, prior year, cost of goods sold, cost of goods sold, prior year, cash flow from operations, current assets, current assets, prior year, total assets, total assets at the end of the prior year, current liabilities, current liabilities, prior year, long-term debt, and long-term debt, prior year
    • Altman Z-score also uses revenue, current assets, total assets, and current liabilities
    • DuPont analysis also uses revenue and total assets
    • Asset turnover also uses revenue and total assets
    • Quick ratio also uses accounts receivable and current liabilities
    • Current ratio also uses current assets and current liabilities
    Sources (1)
    1. The Detection of Earnings Manipulation (Messod D. Beneish, 1999, vol. 55, no. 5, pp. 24–36), Financial Analysts Journal (CFA Institute). Accessed 19 October 2026.
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