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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 -3.09. And the median was -2.64.
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 * 0.9283||+||0.528 * 1.0068||+||0.404 * 1.0753||+||0.892 * 0.9426||+||0.115 * 0.9693|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0438||+||4.679 * -0.0458||-||0.327 * 1.0249|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $1,862 Mil.|
Revenue was 5245 + 5573 + 5897 + 5819 = $22,534 Mil.
Gross Profit was 841 + 1014 + 1234 + 1376 = $4,465 Mil.
Total Current Assets was $7,953 Mil.
Total Assets was $36,528 Mil.
Property, Plant and Equipment(Net PPE) was $14,815 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,280 Mil.
Selling, General & Admin. Expense(SGA) was $979 Mil.
Total Current Liabilities was $5,211 Mil.
Long-Term Debt was $9,044 Mil.
Net Income was -701 + 44 + 140 + 195 = $-322 Mil.
Non Operating Income was -34 + 11 + -217 + 9 = $-231 Mil.
Cash Flow from Operations was 865 + 420 + 472 + -175 = $1,582 Mil.
|Accounts Receivable was $2,128 Mil.
Revenue was 6377 + 6239 + 5836 + 5454 = $23,906 Mil.
Gross Profit was 1404 + 1335 + 1071 + 959 = $4,769 Mil.
Total Current Assets was $7,848 Mil.
Total Assets was $37,363 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 $5,458 Mil.
Long-Term Debt was $8,769 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)|
|=||(1862 / 22534)||/||(2128 / 23906)|
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)|
|=||(1014 / 23906)||/||(841 / 22534)|
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 - (7953 + 14815) / 36528)||/||(1 - (7848 + 16426) / 37363)|
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))|
|=||(1372 / (1372 + 16426))||/||(1280 / (1280 + 14815))|
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 / 22534)||/||(995 / 23906)|
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)|
|=||((9044 + 5211) / 36528)||/||((8769 + 5458) / 37363)|
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|
|=||(-322 - -231||-||1582)||/||36528|
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 -2.80 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