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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.
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.
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 * 0.6718||+||0.528 * 0.7683||+||0.404 * 1.127||+||0.892 * 1.0714||+||0.115 * 0.9062|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9315||+||4.679 * -0.0389||-||0.327 * 1.0672|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,469 Mil.|
Revenue was 5819 + 6377 + 6239 + 5836 = $24,271 Mil.
Gross Profit was 1376 + 1404 + 1335 + 1071 = $5,186 Mil.
Total Current Assets was $7,722 Mil.
Total Assets was $35,694 Mil.
Property, Plant and Equipment(Net PPE) was $15,288 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,353 Mil.
Selling, General & Admin. Expense(SGA) was $991 Mil.
Total Current Liabilities was $5,064 Mil.
Long-Term Debt was $8,711 Mil.
Net Income was 195 + 159 + 149 + 138 = $641 Mil.
Non Operating Income was 9 + 0 + -26 + -5 = $-22 Mil.
Cash Flow from Operations was -175 + 1458 + 249 + 518 = $2,050 Mil.
|Accounts Receivable was $2,041 Mil.
Revenue was 5454 + 5585 + 5765 + 5849 = $22,653 Mil.
Gross Profit was 959 + 877 + 967 + 916 = $3,719 Mil.
Total Current Assets was $6,765 Mil.
Total Assets was $35,605 Mil.
Property, Plant and Equipment(Net PPE) was $17,613 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,401 Mil.
Selling, General & Admin. Expense(SGA) was $993 Mil.
Total Current Liabilities was $5,267 Mil.
Long-Term Debt was $7,609 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(1469 / 24271)||/||(2041 / 22653)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(1404 / 22653)||/||(1376 / 24271)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (7722 + 15288) / 35694)||/||(1 - (6765 + 17613) / 35605)|
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.
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))|
|=||(1401 / (1401 + 17613))||/||(1353 / (1353 + 15288))|
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)|
|=||(991 / 24271)||/||(993 / 22653)|
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)|
|=||((8711 + 5064) / 35694)||/||((7609 + 5267) / 35605)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(641 - -22||-||2050)||/||35694|
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 -2.99 suggests that the company will not be a manipulator.
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
Alcoa Inc Annual Data
Alcoa Inc Quarterly Data