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Alcoa Inc (NYSE:AA)
Beneish M-Score
-2.55 (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 -2.55 suggests that the company is not a manipulator.

AA' s 10-Year Beneish M-Score Range
Min: -3.1   Max: -2.01
Current: -2.55

-3.1
-2.01

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.


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 * 1.1351+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
=-2.55

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

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

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)
=(2142 / 23906) / (1818 / 23032)
=0.08960094 / 0.07893366
=1.1351

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)
=(1335 / 23032) / (1404 / 23906)
=0.16264328 / 0.19948967
=0.8153

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 - (8201 + 16426) / 37411) / (1 - (6969 + 17639) / 35742)
=0.34171768 / 0.31151027
=1.097

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
=23906 / 23032
=1.0379

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))
=0.07460259 / 0.07708731
=0.9678

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)
=0.04162135 / 0.0437652
=0.951

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)
=0.38242763 / 0.3836383
=0.9968

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
=(268 - -12 - 1674) / 37411
=-0.0373

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.


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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.85870.8970.92210.82721.18460.89820.84540.88590.95041.6902
GMI 1.08830.81851.09951.20332.10760.45631.01961.32140.83380.8153
AQI 0.9731.04030.89460.90580.93521.03311.03751.04010.92491.097
SGI 1.13091.18821.01210.87490.68541.13961.18740.94990.97181.0379
DEPI 0.96421.08641.19741.0591.06470.92370.94730.98930.96020.9678
SGAI 0.95910.91121.03730.90621.26140.83580.91.0221.04040.951
LVGI 1.02740.93931.01441.19650.89590.9581.01940.97131.08150.9968
TATA -0.0243-0.0006-0.0518-0.0346-0.0691-0.051-0.0411-0.041-0.1084-0.0363
M-score -2.58-2.44-2.76-2.88-2.36-2.93-2.62-2.63-3.21-2.03

Alcoa Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.87471.16541.16980.89510.89511.07571.26181.05481.70821.1351
GMI 1.53131.32141.18241.01920.78650.83380.85230.84840.88670.8153
AQI 1.07231.04011.02861.0411.03280.92490.9450.90960.82861.097
SGI 0.96660.94990.94110.96050.98130.97180.96290.9670.99011.0379
DEPI 0.98120.98930.99030.98450.97050.96020.96681.01660.97130.9678
SGAI 0.98191.0221.04591.04221.06241.04041.02411.00160.960.951
LVGI 1.02660.97130.96960.96520.96581.08151.01821.03161.06610.9968
TATA -0.0492-0.0408-0.044-0.0482-0.043-0.1084-0.1039-0.0954-0.0901-0.0373
M-score -2.55-2.37-2.47-2.81-2.90-3.10-2.87-3.03-2.41-2.55
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