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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 -2.65.
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 * 1.7082||+||0.528 * 0.9065||+||0.404 * 0.8286||+||0.892 * 0.9901||+||0.115 * 0.9713|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.96||+||4.679 * -0.0893||-||0.327 * 1.0661|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $2,405 Mil.|
Revenue was 6239 + 5836 + 5454 + 5585 = $23,114 Mil.
Gross Profit was 1335 + 1071 + 959 + 877 = $4,242 Mil.
Total Current Assets was $9,689 Mil.
Total Assets was $37,122 Mil.
Property, Plant and Equipment(Net PPE) was $16,716 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,386 Mil.
Selling, General & Admin. Expense(SGA) was $979 Mil.
Total Current Liabilities was $5,354 Mil.
Long-Term Debt was $8,797 Mil.
Net Income was 149 + 138 + -178 + -2339 = $-2,230 Mil.
Non Operating Income was -26 + -5 + -29 + 8 = $-52 Mil.
Cash Flow from Operations was 249 + 518 + -551 + 920 = $1,136 Mil.
|Accounts Receivable was $1,422 Mil.
Revenue was 5765 + 5849 + 5833 + 5898 = $23,345 Mil.
Gross Profit was 967 + 916 + 986 + 1015 = $3,884 Mil.
Total Current Assets was $7,049 Mil.
Total Assets was $38,229 Mil.
Property, Plant and Equipment(Net PPE) was $17,861 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,435 Mil.
Selling, General & Admin. Expense(SGA) was $1,030 Mil.
Total Current Liabilities was $6,040 Mil.
Long-Term Debt was $7,630 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)|
|=||(2405 / 23114)||/||(1422 / 23345)|
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)|
|=||(1071 / 23345)||/||(1335 / 23114)|
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 - (9689 + 16716) / 37122)||/||(1 - (7049 + 17861) / 38229)|
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))|
|=||(1435 / (1435 + 17861))||/||(1386 / (1386 + 16716))|
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)|
|=||(979 / 23114)||/||(1030 / 23345)|
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)|
|=||((8797 + 5354) / 37122)||/||((7630 + 6040) / 38229)|
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|
|=||(-2230 - -52||-||1136)||/||37122|
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 -2.39 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