What is the 'Beneish Model'
The Beneish model is a mathematical model that uses financial ratios and eight variables to identify whether a company has manipulated its earnings. The variables are constructed from the data in the company's financial statements and, once calculated, create an MScore to describe the degree to which the earnings have been manipulated.
BREAKING DOWN 'Beneish Model'
The eight variables are:
1. DSRI  Days' sales in receivable index
2. GMI  Gross margin index
3. AQI  Asset quality index
4. SGI  Sales growth index
5. DEPI  Depreciation index
6. SGAI  Sales and general and administrative expenses index
7. LVGI  Leverage index
8. TATA  Total accruals to total assets
Once calculated, the eight variables are combined together to achieve an MScore for the company. An MScore of less than 2.22 suggests that the company will not be a manipulator. An MScore of greater than 2.22 signals that the company is likely to be a manipulator.

Manipulation
The act of artificially inflating or deflating the price of a ... 
Sensitivity Analysis
Sensitivity analysis is a technique used to determine how different ... 
Quality Of Earnings
The amount of earnings attributable to higher sales or lower ... 
Variable Cost Ratio
Variable costs expressed as a percentage of sales. The variable ... 
High Close
A tactic used by stock manipulators; they make small trades at ... 
Financial Modeling
The process by which a firm constructs a financial representation ...

Investing
How Financial Statements Are Manipulated
Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications. 
Investing
Financial Statement Manipulation An EverPresent Problem For Investors
The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors. 
Trading
Detecting Financial Statement Fraud
Find out how to tell if a company is manipulating its financial data, so you don't invest in the next Enron. 
Investing
Cooking The Books
To spot the signs of earnings manipulation, you need to know the different ways companies can inflate their figures. 
Investing
Look For These Red Flags In The Income Statement
Companies can overstate their revenues and understate their losses to boost investor confidence. Learn how to spot the these red flags in income statements. 
Trading
What's a Sensitivity Analysis?
Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable). 
Markets
Stock and Flow Variables Explained: A Closer Look at Apple
The difference between stock and flow variables is an essential concept in finance and economics. We illustrate with financial statements from Apple Inc. 
Investing
How Deutsche Bank Market Manipulation Impacts Investors (DB)
Explore the ramifications of Deutsche Bank's admission that it manipulated gold and silver from 2007 to 2014, including its similarities to other schemes. 
Markets
Quantitative Easing vs. Currency Manipulation
In theory, quantitative easing and currency manipulation aren't the same thing, but it's much more difficult to tell one from the other in practice. 
Markets
Understanding Regression
Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.

What variables are most important when making a prediction through sensitivity analysis?
Explore sensitivity analysis and how this method considers different variables to determine a course of action based on statistical ... Read Answer >> 
What is the difference between financial forecasting and financial modelling?
Understand the difference between financial forecasting and financial modeling, and learn why a company should conduct both ... Read Answer >> 
Why is overhead cost allocation sometimes manipulated on an income statement?
Learn why companies sometimes manipulate overhead costs to boost the appearance of overall profitability, and other reasons ... Read Answer >> 
Which is wiser, rolling over my traditional IRA to variable annuity or vice versa? ...
I am 46 years old. I have a traditional IRA and Variable Annuity. What will it cost me to roll either way? ... Read Answer >> 
Is it better for a company to have fixed or variable costs?
Understand the difference between a fixed cost and a variable cost, and learn how a company benefits from having more fixed ... Read Answer >> 
What is the difference between direct costs and variable costs?
Learn about variable costs and direct costs, how direct costs and variable costs are classified and the differences between ... Read Answer >>