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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 -3.25. And the median was -2.68.
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 * 1.1967||+||0.528 * 1.1586||+||0.404 * 1.048||+||0.892 * 0.8925||+||0.115 * 1.0441|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1385||+||4.679 * -0.0429||-||0.327 * 0.9903|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,569 Mil.|
Revenue was 4947 + 5245 + 5573 + 5897 = $21,662 Mil.
Gross Profit was 906 + 841 + 1014 + 1234 = $3,995 Mil.
Total Current Assets was $7,665 Mil.
Total Assets was $36,140 Mil.
Property, Plant and Equipment(Net PPE) was $15,016 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,268 Mil.
Selling, General & Admin. Expense(SGA) was $1,007 Mil.
Total Current Liabilities was $5,555 Mil.
Long-Term Debt was $8,257 Mil.
Net Income was 16 + -701 + 44 + 140 = $-501 Mil.
Non Operating Income was -38 + -34 + 11 + -217 = $-278 Mil.
Cash Flow from Operations was -430 + 865 + 420 + 472 = $1,327 Mil.
|Accounts Receivable was $1,469 Mil.
Revenue was 5819 + 6377 + 6239 + 5836 = $24,271 Mil.
Gross Profit was 1376 + 1404 + 1335 + 1071 = $5,186 Mil.
Total Current Assets was $7,722 Mil.
Total Assets was $35,694 Mil.
Property, Plant and Equipment(Net PPE) was $15,288 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,353 Mil.
Selling, General & Admin. Expense(SGA) was $991 Mil.
Total Current Liabilities was $5,064 Mil.
Long-Term Debt was $8,711 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)|
|=||(1569 / 21662)||/||(1469 / 24271)|
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)|
|=||(5186 / 24271)||/||(3995 / 21662)|
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 - (7665 + 15016) / 36140)||/||(1 - (7722 + 15288) / 35694)|
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))|
|=||(1353 / (1353 + 15288))||/||(1268 / (1268 + 15016))|
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)|
|=||(1007 / 21662)||/||(991 / 24271)|
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)|
|=||((8257 + 5555) / 36140)||/||((8711 + 5064) / 35694)|
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|
|=||(-501 - -278||-||1327)||/||36140|
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 -2.51 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