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Alcoa Inc (NYSE:AA)
Beneish M-Score
-3.02 (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 -3.02 suggests that the company is not a manipulator.

AA' s 10-Year Beneish M-Score Range
Min: -3.22   Max: -2
Current: -3.02

-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 * 1.0548+0.528 * 0.8696+0.404 * 0.9096+0.892 * 0.967+0.115 * 1.0166
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0016+4.679 * -0.0946-0.327 * 1.0316
=-3.02

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $1,381 Mil.
Revenue was 5836 + 5454 + 5585 + 5765 = $22,640 Mil.
Gross Profit was 1071 + 959 + 877 + 967 = $3,874 Mil.
Total Current Assets was $7,387 Mil.
Total Assets was $36,309 Mil.
Property, Plant and Equipment(Net PPE) was $17,611 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,388 Mil.
Selling, General & Admin. Expense(SGA) was $984 Mil.
Total Current Liabilities was $5,842 Mil.
Long-Term Debt was $7,612 Mil.
Net Income was 138 + -178 + -2339 + 24 = $-2,355 Mil.
Non Operating Income was -5 + -29 + 8 + 4 = $-22 Mil.
Cash Flow from Operations was 518 + -551 + 920 + 214 = $1,101 Mil.
Accounts Receivable was $1,354 Mil.
Revenue was 5849 + 5833 + 5898 + 5833 = $23,413 Mil.
Gross Profit was 916 + 986 + 1015 + 567 = $3,484 Mil.
Total Current Assets was $7,237 Mil.
Total Assets was $38,551 Mil.
Property, Plant and Equipment(Net PPE) was $18,111 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,453 Mil.
Selling, General & Admin. Expense(SGA) was $1,016 Mil.
Total Current Liabilities was $6,147 Mil.
Long-Term Debt was $7,700 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)
=(1381 / 22640) / (1354 / 23413)
=0.06099823 / 0.05783112
=1.0548

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)
=(959 / 23413) / (1071 / 22640)
=0.14880622 / 0.17111307
=0.8696

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 - (7387 + 17611) / 36309) / (1 - (7237 + 18111) / 38551)
=0.31152056 / 0.34248139
=0.9096

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
=22640 / 23413
=0.967

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))
=(1453 / (1453 + 18111)) / (1388 / (1388 + 17611))
=0.07426907 / 0.07305648
=1.0166

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)
=(984 / 22640) / (1016 / 23413)
=0.0434629 / 0.0433947
=1.0016

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)
=((7612 + 5842) / 36309) / ((7700 + 6147) / 38551)
=0.37054174 / 0.35918653
=1.0316

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
=(-2355 - -22 - 1101) / 36309
=-0.0946

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 -3.02 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

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.67370.72840.87471.16541.16980.89510.89511.07571.26181.0548
GMI 1.15171.3151.53131.28731.15260.99440.76930.85590.87430.8696
AQI 1.02551.05961.07231.02951.02861.0411.03280.92490.9450.9096
SGI 1.1321.03810.96660.94990.94110.96050.98130.97180.96290.967
DEPI 0.94450.9030.98120.99570.99030.98450.97050.96020.96681.0166
SGAI 0.93460.96610.98191.0221.04591.04221.06241.04041.02411.0016
LVGI 1.03921.05881.02660.97130.96960.96520.96581.08151.01821.0316
TATA -0.0458-0.0469-0.049-0.0402-0.0434-0.0478-0.0427-0.1085-0.1032-0.0946
M-score -2.79-2.75-2.55-2.39-2.49-2.82-2.90-3.09-2.86-3.02
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