The Beneish M-Score is a mathematical model created by Professor Beneish that uses eight financial ratios to identify whether a company may have manipulated its earnings figures for reporting purposes. This is measured on a 1 year historical basis.
You can read a more detailed description of the Beneish M-Score here.
Many companies can increase their reported earnings by booking sales early, delaying expense recognition, capitalising expenses and other tricks of the trade. Most of these tricks aren't illegal, but regular practice can signify a company that may be getting into bad habits.
The M Score predicted such high profile failures as Enron and has even been shown to be useful as a short selling technique.
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