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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.
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.
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|
|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
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)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(2885 / 41496)||/||(2762 / 40857)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|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)|
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.
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))|
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)|
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)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(2439 - 0||-||4104)||/||45778|
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.
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
ABB Ltd Annual Data
ABB Ltd Quarterly Data