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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 -3.10. And the median was -2.62.
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 * 1.1351||+||0.528 * 0.8153||+||0.404 * 1.097||+||0.892 * 1.0379||+||0.115 * 0.9678|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.951||+||4.679 * -0.0373||-||0.327 * 0.9968|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,142 Mil.|
Revenue was 6377 + 6239 + 5836 + 5454 = $23,906 Mil.
Gross Profit was 1404 + 1335 + 1071 + 959 = $4,769 Mil.
Total Current Assets was $8,201 Mil.
Total Assets was $37,411 Mil.
Property, Plant and Equipment(Net PPE) was $16,426 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,372 Mil.
Selling, General & Admin. Expense(SGA) was $995 Mil.
Total Current Liabilities was $5,538 Mil.
Long-Term Debt was $8,769 Mil.
Net Income was 159 + 149 + 138 + -178 = $268 Mil.
Non Operating Income was 19 + -26 + -5 + 0 = $-12 Mil.
Cash Flow from Operations was 1458 + 249 + 518 + -551 = $1,674 Mil.
|Accounts Receivable was $1,818 Mil.
Revenue was 5585 + 5765 + 5849 + 5833 = $23,032 Mil.
Gross Profit was 877 + 967 + 916 + 986 = $3,746 Mil.
Total Current Assets was $6,969 Mil.
Total Assets was $35,742 Mil.
Property, Plant and Equipment(Net PPE) was $17,639 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,422 Mil.
Selling, General & Admin. Expense(SGA) was $1,008 Mil.
Total Current Liabilities was $6,105 Mil.
Long-Term Debt was $7,607 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)|
|=||(2142 / 23906)||/||(1818 / 23032)|
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)|
|=||(1335 / 23032)||/||(1404 / 23906)|
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 - (8201 + 16426) / 37411)||/||(1 - (6969 + 17639) / 35742)|
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))|
|=||(1422 / (1422 + 17639))||/||(1372 / (1372 + 16426))|
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)|
|=||(995 / 23906)||/||(1008 / 23032)|
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)|
|=||((8769 + 5538) / 37411)||/||((7607 + 6105) / 35742)|
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|
|=||(268 - -12||-||1674)||/||37411|
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 -2.55 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