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ABB Ltd (NYSE:ABB)
Beneish M-Score
-2.78 (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.

ABB Ltd has a M-score of -2.77 suggests that the company is not a manipulator.

ABB' s Beneish M-Score Range Over the Past 10 Years
Min: -2.94   Max: -2.22
Current: -2.78

-2.94
-2.22

During the past 13 years, the highest Beneish M-Score of ABB Ltd was -2.22. The lowest was -2.94. And the median was -2.59.


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 ABB Ltd 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 * 1.068+0.528 * 0.9844+0.404 * 0.9977+0.892 * 0.895+0.115 * 1.0942
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0537+4.679 * -0.0514-0.327 * 1.0331
=-2.77

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

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Accounts Receivable was $10,131 Mil.
Revenue was 7903 + 9242 + 8519 + 9165 = $34,829 Mil.
Gross Profit was 2358 + 2395 + 2518 + 2720 = $9,991 Mil.
Total Current Assets was $23,083 Mil.
Total Assets was $41,814 Mil.
Property, Plant and Equipment(Net PPE) was $5,347 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,145 Mil.
Selling, General & Admin. Expense(SGA) was $5,535 Mil.
Total Current Liabilities was $15,770 Mil.
Long-Term Debt was $6,126 Mil.
Net Income was 500 + 204 + 577 + 588 = $1,869 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 252 + 1994 + 1173 + 598 = $4,017 Mil.
Accounts Receivable was $10,599 Mil.
Revenue was 8555 + 10346 + 9823 + 10190 = $38,914 Mil.
Gross Profit was 2501 + 2841 + 2762 + 2885 = $10,989 Mil.
Total Current Assets was $23,999 Mil.
Total Assets was $43,135 Mil.
Property, Plant and Equipment(Net PPE) was $5,298 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,267 Mil.
Selling, General & Admin. Expense(SGA) was $5,869 Mil.
Total Current Liabilities was $14,661 Mil.
Long-Term Debt was $7,203 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)
=(10131 / 34829) / (10599 / 38914)
=0.29087829 / 0.27236984
=1.068

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)
=(2395 / 38914) / (2358 / 34829)
=0.28239194 / 0.28685865
=0.9844

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 - (23083 + 5347) / 41814) / (1 - (23999 + 5298) / 43135)
=0.32008418 / 0.32080677
=0.9977

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
=34829 / 38914
=0.895

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))
=(1267 / (1267 + 5298)) / (1145 / (1145 + 5347))
=0.19299315 / 0.17637092
=1.0942

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)
=(5535 / 34829) / (5869 / 38914)
=0.15891929 / 0.15081976
=1.0537

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)
=((6126 + 15770) / 41814) / ((7203 + 14661) / 43135)
=0.52365237 / 0.50687377
=1.0331

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
=(1869 - 0 - 4017) / 41814
=-0.0514

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.

ABB Ltd has a M-score of -2.77 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.

ABB Ltd Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.94241.01670.96841.12251.06180.62741.05690.95450.96961.0472
GMI 0.88850.91590.98071.06840.97231.00231.04051.00941.01770.9858
AQI 0.76440.77991.06170.98981.1621.51931.11691.03880.991.0163
SGI 1.08781.19541.19630.91070.99351.20261.03541.06390.95180.8908
DEPI 1.12031.08340.99951.12960.99840.82531.01420.95250.92791.0408
SGAI 1.03930.93860.97821.04260.84030.96811.03460.99521.0461.0314
LVGI 0.88540.86141.01240.88891.02111.01351.08220.93381.01181.0342
TATA -0.02790.0205-0.0091-0.0324-0.0451-0.0112-0.0219-0.018-0.0279-0.0456
M-score -2.69-2.26-2.36-2.52-2.57-2.50-2.46-2.51-2.70-2.76

ABB Ltd Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.67890.9870.96630.94780.96960.92771.00331.00081.04721.068
GMI 1.00941.00761.02071.04181.01771.01020.98760.95770.98580.9844
AQI 1.03880.98920.96980.95930.991.03581.03211.03441.01630.9977
SGI 1.06391.03641.02120.98460.95180.93530.91150.89540.89080.895
DEPI 0.95250.99710.99210.9270.92790.91870.98031.02881.04081.0942
SGAI 0.99521.0091.03071.05631.0461.01990.99920.98271.03141.0537
LVGI 0.93380.96550.99491.01491.01181.00521.02270.99521.03421.0331
TATA -0.018-0.0239-0.0348-0.0364-0.0279-0.0308-0.0255-0.0299-0.0456-0.0514
M-score -2.76-2.56-2.66-2.73-2.70-2.74-2.68-2.71-2.76-2.77
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