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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 -2.01. The lowest was -3.25. And the median was -2.67.
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 * 1.1828||+||0.528 * 1.2057||+||0.404 * 0.9782||+||0.892 * 0.8655||+||0.115 * 1.029|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2733||+||4.679 * -0.046||-||0.327 * 1.0013|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,595 Mil.|
Revenue was 5295 + 4947 + 5245 + 5573 = $21,060 Mil.
Gross Profit was 1079 + 906 + 841 + 1014 = $3,840 Mil.
Total Current Assets was $8,093 Mil.
Total Assets was $36,139 Mil.
Property, Plant and Equipment(Net PPE) was $15,017 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,261 Mil.
Selling, General & Admin. Expense(SGA) was $1,069 Mil.
Total Current Liabilities was $5,488 Mil.
Long-Term Debt was $8,278 Mil.
Net Income was 135 + 16 + -701 + 44 = $-506 Mil.
Non Operating Income was 32 + -38 + -34 + 11 = $-29 Mil.
Cash Flow from Operations was 332 + -430 + 865 + 420 = $1,187 Mil.
|Accounts Receivable was $1,558 Mil.
Revenue was 5897 + 5819 + 6377 + 6239 = $24,332 Mil.
Gross Profit was 1234 + 1376 + 1404 + 1335 = $5,349 Mil.
Total Current Assets was $7,829 Mil.
Total Assets was $36,587 Mil.
Property, Plant and Equipment(Net PPE) was $15,274 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,323 Mil.
Selling, General & Admin. Expense(SGA) was $970 Mil.
Total Current Liabilities was $5,206 Mil.
Long-Term Debt was $8,713 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)|
|=||(1595 / 21060)||/||(1558 / 24332)|
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)|
|=||(5349 / 24332)||/||(3840 / 21060)|
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 - (8093 + 15017) / 36139)||/||(1 - (7829 + 15274) / 36587)|
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))|
|=||(1323 / (1323 + 15274))||/||(1261 / (1261 + 15017))|
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)|
|=||(1069 / 21060)||/||(970 / 24332)|
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)|
|=||((8278 + 5488) / 36139)||/||((8713 + 5206) / 36587)|
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|
|=||(-506 - -29||-||1187)||/||36139|
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 -2.59 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