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Alcoa Inc (NYSE:AA)
Beneish M-Score
-2.39 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Alcoa Inc has a M-score of -2.39 suggests that the company is not a manipulator.

AA' s 10-Year Beneish M-Score Range
Min: -3.22   Max: -2
Current: -2.39

-3.22
-2

During the past 13 years, the highest Beneish M-Score of Alcoa Inc was -2.00. The lowest was -3.22. And the median was -2.65.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Alcoa Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 1.7082+0.528 * 0.9065+0.404 * 0.8286+0.892 * 0.9901+0.115 * 0.9713
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.96+4.679 * -0.0893-0.327 * 1.0661
=-2.39

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $2,405 Mil.
Revenue was 6239 + 5836 + 5454 + 5585 = $23,114 Mil.
Gross Profit was 1335 + 1071 + 959 + 877 = $4,242 Mil.
Total Current Assets was $9,689 Mil.
Total Assets was $37,122 Mil.
Property, Plant and Equipment(Net PPE) was $16,716 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,386 Mil.
Selling, General & Admin. Expense(SGA) was $979 Mil.
Total Current Liabilities was $5,354 Mil.
Long-Term Debt was $8,797 Mil.
Net Income was 149 + 138 + -178 + -2339 = $-2,230 Mil.
Non Operating Income was -26 + -5 + -29 + 8 = $-52 Mil.
Cash Flow from Operations was 249 + 518 + -551 + 920 = $1,136 Mil.
Accounts Receivable was $1,422 Mil.
Revenue was 5765 + 5849 + 5833 + 5898 = $23,345 Mil.
Gross Profit was 967 + 916 + 986 + 1015 = $3,884 Mil.
Total Current Assets was $7,049 Mil.
Total Assets was $38,229 Mil.
Property, Plant and Equipment(Net PPE) was $17,861 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,435 Mil.
Selling, General & Admin. Expense(SGA) was $1,030 Mil.
Total Current Liabilities was $6,040 Mil.
Long-Term Debt was $7,630 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2405 / 23114) / (1422 / 23345)
=0.10404949 / 0.0609124
=1.7082

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1071 / 23345) / (1335 / 23114)
=0.16637396 / 0.18352514
=0.9065

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (9689 + 16716) / 37122) / (1 - (7049 + 17861) / 38229)
=0.28869673 / 0.34840043
=0.8286

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=23114 / 23345
=0.9901

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(1435 / (1435 + 17861)) / (1386 / (1386 + 16716))
=0.07436774 / 0.07656613
=0.9713

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(979 / 23114) / (1030 / 23345)
=0.04235528 / 0.0441208
=0.96

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((8797 + 5354) / 37122) / ((7630 + 6040) / 38229)
=0.38120252 / 0.35758194
=1.0661

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-2230 - -52 - 1136) / 37122
=-0.0893

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Alcoa Inc has a M-score of -2.39 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Alcoa Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.97180.85870.8970.92210.82721.18460.89820.84540.88590.9504
GMI 0.98421.08830.81851.09951.20332.10760.45631.01961.28730.8559
AQI 1.01030.9731.04030.89460.90580.93521.03311.04821.02950.9249
SGI 1.08331.13091.18821.01210.87490.68541.13961.18740.94990.9718
DEPI 0.97130.96421.08641.19741.0591.06470.92370.94130.99570.9602
SGAI 0.90270.95910.91121.03730.90621.26140.83580.91.0221.0404
LVGI 0.95871.02740.93931.01441.19650.89590.9581.01940.97131.0815
TATA -0.0341-0.0243-0.0006-0.0518-0.0346-0.0691-0.051-0.0416-0.0402-0.1084
M-score -2.57-2.58-2.44-2.76-2.88-2.36-2.93-2.62-2.65-3.20

Alcoa Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.72840.87471.16541.16980.89510.89511.07571.26181.05481.7082
GMI 1.3151.53131.28731.15260.99440.76930.85590.87430.86960.9065
AQI 1.05961.07231.02951.02861.0411.03280.92490.9450.90960.8286
SGI 1.03810.96660.94990.94110.96050.98130.97180.96290.9670.9901
DEPI 0.9030.98120.99570.99030.98450.97050.96020.96681.01660.9713
SGAI 0.96610.98191.0221.04591.04221.06241.04041.02411.00160.96
LVGI 1.05881.02660.97130.96960.96520.96581.08151.01821.03161.0661
TATA -0.0469-0.049-0.0402-0.0434-0.0478-0.0427-0.1085-0.1032-0.0946-0.0893
M-score -2.75-2.55-2.39-2.49-2.82-2.90-3.09-2.86-3.02-2.39
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