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ABB Ltd (NYSE:ABB)
Beneish M-Score
-2.71 (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 -2.73 suggests that the company is not a manipulator.

ABB' s 10-Year Beneish M-Score Range
Min: -3.02   Max: -2.22
Current: -2.71

-3.02
-2.22

During the past 13 years, the highest Beneish M-Score of ABB Ltd was -2.22. The lowest was -3.02. And the median was -2.52.


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 * 0.9478+0.528 * 1.0418+0.404 * 0.9593+0.892 * 0.9846+0.115 * 0.927
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0563+4.679 * -0.0364-0.327 * 1.0149
=-2.73

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $11,788 Mil.
Revenue was 9823 + 10190 + 9471 + 11373 = $40,857 Mil.
Gross Profit was 2762 + 2885 + 2727 + 2942 = $11,316 Mil.
Total Current Assets was $25,814 Mil.
Total Assets was $45,778 Mil.
Property, Plant and Equipment(Net PPE) was $5,652 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,340 Mil.
Selling, General & Admin. Expense(SGA) was $6,240 Mil.
Total Current Liabilities was $16,383 Mil.
Long-Term Debt was $7,408 Mil.
Net Income was 734 + 636 + 544 + 525 = $2,439 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1169 + 888 + -45 + 2092 = $4,104 Mil.
Accounts Receivable was $12,632 Mil.
Revenue was 10535 + 10225 + 9715 + 11021 = $41,496 Mil.
Gross Profit was 3174 + 3025 + 2851 + 2923 = $11,973 Mil.
Total Current Assets was $25,920 Mil.
Total Assets was $47,426 Mil.
Property, Plant and Equipment(Net PPE) was $6,050 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,307 Mil.
Selling, General & Admin. Expense(SGA) was $6,000 Mil.
Total Current Liabilities was $16,733 Mil.
Long-Term Debt was $7,553 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)
=(11788 / 40857) / (12632 / 41496)
=0.28851849 / 0.30441488
=0.9478

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)
=(2885 / 41496) / (2762 / 40857)
=0.28853383 / 0.276966
=1.0418

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 - (25814 + 5652) / 45778) / (1 - (25920 + 6050) / 47426)
=0.31263926 / 0.32589719
=0.9593

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
=40857 / 41496
=0.9846

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))
=(1307 / (1307 + 6050)) / (1340 / (1340 + 5652))
=0.17765394 / 0.1916476
=0.927

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)
=(6240 / 40857) / (6000 / 41496)
=0.15272781 / 0.14459225
=1.0563

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)
=((7408 + 16383) / 45778) / ((7553 + 16733) / 47426)
=0.51970379 / 0.51208198
=1.0149

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
=(2439 - 0 - 4104) / 45778
=-0.0364

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 -2.73 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.04830.97960.92310.96960.96841.12251.06180.62741.05690.9545
GMI 0.90380.93630.89810.94260.98071.06840.97231.00231.04051.0094
AQI 1.08791.02630.76440.77991.06170.98981.1621.51931.11691.0388
SGI 0.9911.04041.11051.25351.19630.91070.99351.20261.03541.0639
DEPI 0.96550.92681.12031.08340.99951.12960.99840.82531.01420.9525
SGAI 0.96490.96191.03050.91740.97820.8471.03430.96811.03460.9952
LVGI 0.96060.95410.88540.86141.01240.88891.02111.01351.08220.9338
TATA -0.0484-0.0158-0.02840.0205-0.0254-0.0324-0.0451-0.0112-0.0219-0.018
M-score -2.67-2.55-2.69-2.24-2.44-2.49-2.60-2.50-2.46-2.51

ABB Ltd Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.93561.01021.03771.02631.03131.01820.67890.9870.96630.9478
GMI 1.03221.02741.04051.04391.02631.02031.00941.00761.02071.0418
AQI 1.32821.24131.11691.21020.93740.97621.03880.98920.96980.9593
SGI 1.09421.06251.03541.04281.05791.06711.06391.03641.02120.9846
DEPI 0.88550.99561.01420.93710.89740.92040.95250.99710.99210.927
SGAI 1.00831.01021.03461.03851.00941.0010.99521.0091.03071.0563
LVGI 1.0681.02671.08221.02550.96160.96790.93380.96550.99491.0149
TATA -0.0014-0.0011-0.02-0.0168-0.0141-0.0219-0.018-0.0239-0.0348-0.0364
M-score -2.35-2.32-2.47-2.41-2.48-2.50-2.76-2.56-2.66-2.73
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