Beneish M-Score — Beneish M-Score

Formula

Weighted combination of eight year-over-year accounting indices

Illustrative example

Collect the required current-year and prior-year figures before calculating the accounting indices. An unusual receivables trend is a reason to inspect the filings; it is not evidence of manipulation on its own.

Educational example; these are not reported company figures.

How to interpret it

• Scores above the commonly used -1.78 threshold warrant closer review.
• The direction and movement of the eight component indices matter.

Limitations

• The model can produce false positives.
• Banks, insurers and missing historical inputs require special care.

Frequently asked questions

What is Beneish M-Score?

The Beneish M-Score screens for patterns associated with possible earnings manipulation. A concerning score is a prompt for deeper filing review, not proof of misconduct.

How is Beneish M-Score calculated?

Weighted combination of eight year-over-year accounting indices

What should investors watch for with Beneish M-Score?

The model can produce false positives. Banks, insurers and missing historical inputs require special care.