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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.
Alcoa Inc has a M-score of -3.02 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Alcoa Inc was -1.91. The lowest was -3.13. And the median was -2.63.
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 * 1.0448||+||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|
* 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 $2,052 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 $2,031 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
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(2052 / 22640)||/||(2031 / 23413)|
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)|
|=||(959 / 23413)||/||(1071 / 22640)|
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 - (7387 + 17611) / 36309)||/||(1 - (7237 + 18111) / 38551)|
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))|
|=||(1453 / (1453 + 18111))||/||(1388 / (1388 + 17611))|
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)|
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)|
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|
|=||(-2355 - -22||-||1101)||/||36309|
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.
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