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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 -2.64.
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 * 1.0497||+||0.528 * 0.7784||+||0.404 * 1.1831||+||0.892 * 1.0747||+||0.115 * 0.9165|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9172||+||4.679 * -0.0308||-||0.327 * 1.0267|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|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.
Net Income was 140 + 195 + 159 + 149 = $643 Mil.
Non Operating Income was -217 + 9 + 0 + -26 = $-234 Mil.
Cash Flow from Operations was 472 + -175 + 1458 + 249 = $2,004 Mil.
|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.
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)|
|=||(1558 / 24332)||/||(1381 / 22640)|
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)|
|=||(1376 / 22640)||/||(1234 / 24332)|
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 - (7829 + 15274) / 36587)||/||(1 - (7387 + 17611) / 36309)|
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))|
|=||(1388 / (1388 + 17611))||/||(1323 / (1323 + 15274))|
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)|
|=||(970 / 24332)||/||(984 / 22640)|
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)|
|=||((8713 + 5206) / 36587)||/||((7612 + 5842) / 36309)|
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|
|=||(643 - -234||-||2004)||/||36587|
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 -2.56 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