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ABB Ltd (NYSE:ABB)
Beneish M-Score
-2.85 (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 -2.88 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: -2.85

-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 * 1.0349+0.528 * 1.0128+0.404 * 0.9816+0.892 * 0.9064+0.115 * 1.0483
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0819+4.679 * -0.067-0.327 * 1.0934
=-2.88

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

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $10,384 Mil.
Revenue was 8677 + 7903 + 9242 + 8519 = $34,341 Mil.
Gross Profit was 2415 + 2358 + 2395 + 2518 = $9,686 Mil.
Total Current Assets was $23,470 Mil.
Total Assets was $42,003 Mil.
Property, Plant and Equipment(Net PPE) was $5,239 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,139 Mil.
Selling, General & Admin. Expense(SGA) was $5,562 Mil.
Total Current Liabilities was $18,060 Mil.
Long-Term Debt was $6,355 Mil.
Net Income was 406 + 500 + 204 + 577 = $1,687 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1082 + 252 + 1994 + 1173 = $4,501 Mil.
Accounts Receivable was $11,071 Mil.
Revenue was 9165 + 8555 + 10346 + 9823 = $37,889 Mil.
Gross Profit was 2720 + 2501 + 2841 + 2762 = $10,824 Mil.
Total Current Assets was $23,600 Mil.
Total Assets was $42,693 Mil.
Property, Plant and Equipment(Net PPE) was $5,327 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,227 Mil.
Selling, General & Admin. Expense(SGA) was $5,672 Mil.
Total Current Liabilities was $16,051 Mil.
Long-Term Debt was $6,646 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)
=(10384 / 34341) / (11071 / 37889)
=0.30237908 / 0.29219562
=1.0349

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)
=(10824 / 37889) / (9686 / 34341)
=0.28567658 / 0.28205352
=1.0128

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 - (23470 + 5239) / 42003) / (1 - (23600 + 5327) / 42693)
=0.3165012 / 0.32244162
=0.9816

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
=34341 / 37889
=0.9064

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))
=(1227 / (1227 + 5327)) / (1139 / (1139 + 5239))
=0.18721392 / 0.17858263
=1.0483

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)
=(5562 / 34341) / (5672 / 37889)
=0.16196383 / 0.14970044
=1.0819

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)
=((6355 + 18060) / 42003) / ((6646 + 16051) / 42693)
=0.581268 / 0.53163282
=1.0934

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
=(1687 - 0 - 4501) / 42003
=-0.067

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 -2.88 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 0.92310.96960.96841.12251.06180.62741.05690.95450.96961.0472
GMI 0.89810.94260.98071.06840.97231.00231.04051.00941.01770.9858
AQI 0.76440.77991.06170.98981.1621.51931.11691.03880.991.0163
SGI 1.11051.25351.19630.91070.99351.20261.03541.06390.95180.8908
DEPI 1.12031.08340.99951.12960.99840.82531.01420.95250.92791.0408
SGAI 1.03050.91740.97820.8471.03430.96811.03460.99521.0461.0314
LVGI 0.88540.86141.01240.88891.02111.01351.08220.93381.01181.0342
TATA -0.02840.0205-0.0254-0.0324-0.0451-0.0112-0.0219-0.018-0.0279-0.0456
M-score -2.69-2.24-2.44-2.49-2.60-2.50-2.46-2.51-2.70-2.76

ABB Ltd Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 0.9870.96630.94780.96960.92771.00331.00081.04721.0681.0349
GMI 1.00761.02071.04181.01771.01020.98760.95770.98580.98441.0128
AQI 0.98920.96980.95930.991.03581.03211.03441.01630.99770.9816
SGI 1.03641.02120.98460.95180.93530.91150.89540.89080.8950.9064
DEPI 0.99710.99210.9270.92790.91870.98031.02881.04081.09421.0483
SGAI 1.0091.03071.05631.0461.01990.99920.98271.03141.05371.0819
LVGI 0.96550.99491.01491.01181.00521.02270.99521.03421.03311.0934
TATA -0.0239-0.0348-0.0364-0.0279-0.0308-0.0255-0.0299-0.0456-0.0514-0.067
M-score -2.56-2.66-2.73-2.70-2.74-2.68-2.71-2.76-2.77-2.88
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