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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 -2.66 suggests that the company is not a manipulator.

ABB' s 10-Year Beneish M-Score Range
Min: -3   Max: -2.19
Current: -2.71

-3
-2.19

During the past 13 years, the highest Beneish M-Score of ABB Ltd was -2.19. The lowest was -3.00. 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 * 0.9663+0.528 * 1.0207+0.404 * 0.9698+0.892 * 1.0212+0.115 * 0.9921
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0307+4.679 * -0.0348-0.327 * 0.9949
=-2.66

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $12,106 Mil.
Revenue was 10190 + 9471 + 11373 + 10535 = $41,569 Mil.
Gross Profit was 2885 + 2727 + 2942 + 3174 = $11,728 Mil.
Total Current Assets was $26,384 Mil.
Total Assets was $47,075 Mil.
Property, Plant and Equipment(Net PPE) was $5,984 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,345 Mil.
Selling, General & Admin. Expense(SGA) was $6,228 Mil.
Total Current Liabilities was $16,886 Mil.
Long-Term Debt was $7,585 Mil.
Net Income was 636 + 544 + 525 + 835 = $2,540 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 888 + -45 + 2092 + 1241 = $4,176 Mil.
Accounts Receivable was $12,268 Mil.
Revenue was 10225 + 9715 + 11021 + 9745 = $40,706 Mil.
Gross Profit was 3025 + 2851 + 2923 + 2923 = $11,722 Mil.
Total Current Assets was $25,069 Mil.
Total Assets was $45,513 Mil.
Property, Plant and Equipment(Net PPE) was $5,782 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,287 Mil.
Selling, General & Admin. Expense(SGA) was $5,917 Mil.
Total Current Liabilities was $16,363 Mil.
Long-Term Debt was $7,417 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)
=(12106 / 41569) / (12268 / 40706)
=0.29122664 / 0.30138063
=0.9663

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)
=(2727 / 40706) / (2885 / 41569)
=0.28796738 / 0.28213332
=1.0207

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 - (26384 + 5984) / 47075) / (1 - (25069 + 5782) / 45513)
=0.31241636 / 0.32214972
=0.9698

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
=41569 / 40706
=1.0212

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))
=(1287 / (1287 + 5782)) / (1345 / (1345 + 5984))
=0.18206253 / 0.18351753
=0.9921

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)
=(6228 / 41569) / (5917 / 40706)
=0.14982319 / 0.14535941
=1.0307

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)
=((7585 + 16886) / 47075) / ((7417 + 16363) / 45513)
=0.51983006 / 0.52248808
=0.9949

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
=(2540 - 0 - 4176) / 47075
=-0.0348

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 -2.66 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 1.07580.95031.02670.98670.90051.12251.06180.89851.03770.6167
GMI 1.04720.9580.88850.91590.98071.06840.97231.00231.04051.0094
AQI 1.29060.97110.82090.72541.06850.98351.1621.51931.11691.0388
SGI 1.10251.08311.08781.19541.19630.91070.99351.20261.03541.0639
DEPI 0.97520.92771.11991.07760.99951.12960.99840.82531.01420.9525
SGAI 0.89660.95651.03930.93860.97821.04260.84030.96811.03460.9952
LVGI 0.98420.9580.88580.86741.01280.88851.02111.01351.08220.9338
TATA -0.0509-0.0152-0.02790.0205-0.009-0.0324-0.0451-0.0112-0.0219-0.018
M-score -2.39-2.54-2.59-2.31-2.42-2.53-2.57-2.25-2.48-2.82

ABB Ltd Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.91190.93561.01021.03771.02631.03131.01820.61670.9870.9663
GMI 1.00981.03221.02741.04051.04391.02631.02031.00941.00761.0207
AQI 0.98011.32821.24131.11691.21020.93740.97621.03880.98920.9698
SGI 1.16451.09421.06251.03541.04281.05791.06711.06391.03641.0212
DEPI 0.82240.87660.98211.01420.93710.89740.92040.95250.99710.9921
SGAI 1.03641.12031.18241.03461.03851.00941.0010.99521.0091.0307
LVGI 1.05151.0681.02671.08221.02550.96160.96790.93380.96550.9949
TATA -0.0045-0.0014-0.0011-0.02-0.0168-0.0141-0.0219-0.018-0.0239-0.0348
M-score -2.48-2.37-2.35-2.47-2.41-2.48-2.50-2.82-2.56-2.66
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