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Alcoa Inc (NYSE:AA)
Beneish M-Score
-3.09 (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 -3.06 suggests that the company is not a manipulator.

AA' s 10-Year Beneish M-Score Range
Min: -3.09   Max: -1.91
Current: -3.09

-3.09
-1.91

During the past 13 years, the highest Beneish M-Score of Alcoa Inc was -1.91. The lowest was -3.09. And the median was -2.63.


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 * 1.0504+0.528 * 0.8743+0.404 * 0.945+0.892 * 0.9629+0.115 * 0.9668
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0241+4.679 * -0.1039-0.327 * 1.0182
=-3.06

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
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.
Net Income was -178 + -2339 + 24 + -119 = $-2,612 Mil.
Non Operating Income was 0 + 8 + 4 + -23 = $-11 Mil.
Cash Flow from Operations was -551 + 920 + 214 + 514 = $1,097 Mil.
Accounts Receivable was $2,018 Mil.
Revenue was 5833 + 5898 + 5833 + 5963 = $23,527 Mil.
Gross Profit was 986 + 1015 + 567 + 809 = $3,377 Mil.
Total Current Assets was $7,768 Mil.
Total Assets was $40,106 Mil.
Property, Plant and Equipment(Net PPE) was $18,956 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,454 Mil.
Selling, General & Admin. Expense(SGA) was $1,007 Mil.
Total Current Liabilities was $6,500 Mil.
Long-Term Debt was $7,745 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)
=(2041 / 22653) / (2018 / 23527)
=0.09009844 / 0.08577379
=1.0504

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)
=(877 / 23527) / (959 / 22653)
=0.14353721 / 0.16417252
=0.8743

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 - (6765 + 17613) / 35605) / (1 - (7768 + 18956) / 40106)
=0.31532088 / 0.33366579
=0.945

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
=22653 / 23527
=0.9629

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))
=(1454 / (1454 + 18956)) / (1401 / (1401 + 17613))
=0.07123959 / 0.07368255
=0.9668

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)
=(993 / 22653) / (1007 / 23527)
=0.04383525 / 0.04280189
=1.0241

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)
=((7609 + 5267) / 35605) / ((7745 + 6500) / 40106)
=0.3616346 / 0.35518376
=1.0182

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
=(-2612 - -11 - 1097) / 35605
=-0.1039

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 -3.06 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 0.93580.910.85630.97650.971.22860.76050.86490.94271.0757
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 -2.60-2.53-2.48-2.71-2.75-2.32-3.05-2.60-2.60-3.09

Alcoa Inc Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 0.86490.93280.8090.92940.94271.01481.02851.00481.07571.0504
GMI 1.01961.15171.3151.53131.28731.15260.99440.76930.85590.8743
AQI 1.04821.02551.05961.07231.02951.02861.0411.03280.92490.945
SGI 1.18741.1321.03810.96660.94990.94110.96050.98130.97180.9629
DEPI 0.94130.94450.9030.98120.99570.99030.98450.97050.96020.9668
SGAI 0.90.93460.96610.98191.0221.04591.04221.06241.04041.0241
LVGI 1.01941.03921.05881.02660.97130.96960.96520.96581.08151.0182
TATA -0.0415-0.0458-0.0469-0.049-0.0402-0.0434-0.0477-0.0426-0.1084-0.1039
M-score -2.60-2.56-2.68-2.50-2.60-2.63-2.70-2.80-3.09-3.06
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