Beneish Model

It's like a lie detector for financial results. The Beneish model is a series of ratios and other calculations that signal how suspicious a company's financial statements are. Score a high Beneish M-Score, and it's likely your company is cooking the books.

The model was published in the late 1990s by a professor named M. Daniel Beneish, a faculty member at the Kelley School of Business at Indiana University. The details of the calculations are fairly complicated, but it involves a series of indices produced by comparing different financial measures at the company. Some components include an index of sales growth, a ratio of total accruals to total assets and an index of asset quality.