The Beneish M-Score combines eight accounting ratios — covering receivables, margins, asset quality, depreciation, and accruals — into a single score designed to flag companies with a statistically elevated likelihood of earnings manipulation.
The formula
8 Weighted Accounting Ratios−Model Constant
= M-Score
Why it matters
- —Built from the same kind of accrual and asset-quality red flags that preceded several well-known accounting scandals.
- —A high M-Score is a prompt to dig deeper into revenue recognition and accruals — not, by itself, proof of fraud.
- —Best used as a screening filter across many companies, not a verdict on any single one.
How to read it
| < −2.22 | Accounting signals consistent with clean earnings |
| −2.22 to −1.78 | Grey zone — some manipulation signals present |
| > −1.78 | Elevated risk signal — warrants closer scrutiny |