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ABB Ltd (NYSE:ABB)
Beneish M-Score
-2.73 (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 -2.78 suggests that the company is not a manipulator.

ABB' s 10-Year Beneish M-Score Range
Min: -3.02   Max: -2.22
Current: -2.73

-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 -2.53.


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 * 0.954+0.528 * 1.0059+0.404 * 1.0411+0.892 * 0.95+0.115 * 0.924
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.016+4.679 * -0.0433-0.327 * 1.0543
=-2.78

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

This Year (Jun15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $11,071 Mil.
Revenue was 9165 + 10346 + 9823 + 10190 = $39,524 Mil.
Gross Profit was 2720 + 2841 + 2762 + 2885 = $11,208 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 $1,265 Mil.
Selling, General & Admin. Expense(SGA) was $5,938 Mil.
Total Current Liabilities was $16,051 Mil.
Long-Term Debt was $6,646 Mil.
Net Income was 588 + 680 + 734 + 636 = $2,638 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 598 + 1833 + 1169 + 888 = $4,488 Mil.
Accounts Receivable was $12,215 Mil.
Revenue was 9471 + 11373 + 10535 + 10225 = $41,604 Mil.
Gross Profit was 2727 + 2942 + 3174 + 3025 = $11,868 Mil.
Total Current Assets was $27,510 Mil.
Total Assets was $48,793 Mil.
Property, Plant and Equipment(Net PPE) was $6,171 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,330 Mil.
Selling, General & Admin. Expense(SGA) was $6,152 Mil.
Total Current Liabilities was $16,993 Mil.
Long-Term Debt was $7,612 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)
=(11071 / 39524) / (12215 / 41604)
=0.28010829 / 0.29360158
=0.954

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)
=(2841 / 41604) / (2720 / 39524)
=0.28526103 / 0.28357454
=1.0059

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 - (23600 + 5327) / 42693) / (1 - (27510 + 6171) / 48793)
=0.32244162 / 0.30971656
=1.0411

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
=39524 / 41604
=0.95

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))
=(1330 / (1330 + 6171)) / (1265 / (1265 + 5327))
=0.17730969 / 0.19189927
=0.924

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)
=(5938 / 39524) / (6152 / 41604)
=0.15023783 / 0.1478704
=1.016

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)
=((6646 + 16051) / 42693) / ((7612 + 16993) / 48793)
=0.53163282 / 0.50427315
=1.0543

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
=(2638 - 0 - 4488) / 42693
=-0.0433

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 -2.78 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.97960.92310.96960.96841.12251.06180.62741.05690.95450.9696
GMI 0.93630.89810.94260.98071.06840.97231.00231.04051.00941.0177
AQI 1.02630.76440.77991.06170.98981.1621.51931.11691.03880.9913
SGI 1.04041.11051.25351.19630.91070.99351.20261.03541.06390.9518
DEPI 0.92681.12031.08340.99951.12960.99840.82531.01420.95250.9279
SGAI 0.96191.03050.91740.97820.8471.03430.96811.03460.99521.046
LVGI 0.95410.88540.86141.01240.88891.02111.01351.08220.93381.0124
TATA -0.0158-0.02840.0205-0.0254-0.0324-0.0451-0.0112-0.0219-0.018-0.0279
M-score -2.55-2.69-2.24-2.44-2.49-2.60-2.50-2.46-2.51-2.70

ABB Ltd Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Jun15
DSRI 1.03771.02631.03131.01820.67890.9870.96630.94780.96960.954
GMI 1.04051.04391.02631.02031.00941.00761.02071.04181.01771.0059
AQI 1.11691.21020.93740.97621.03880.98920.96980.95930.99131.0411
SGI 1.03541.04281.05791.06711.06391.03641.02120.98460.95180.95
DEPI 1.01420.93710.89740.92040.95250.99710.99210.9270.92790.924
SGAI 1.03461.03851.00941.0010.99521.0091.03071.05631.0461.016
LVGI 1.08221.02550.96160.96790.93380.96550.99491.01491.01241.0543
TATA -0.02-0.0168-0.0141-0.0219-0.018-0.0239-0.0348-0.0364-0.0279-0.0433
M-score -2.47-2.41-2.48-2.50-2.76-2.56-2.66-2.73-2.70-2.78
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