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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 -2.24. The lowest was -2.94. And the median was -2.60.
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|
* 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
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)|
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)|
|=||(10824 / 37889)||/||(9686 / 34341)|
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 - (23470 + 5239) / 42003)||/||(1 - (23600 + 5327) / 42693)|
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))|
|=||(1227 / (1227 + 5327))||/||(1139 / (1139 + 5239))|
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)|
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)|
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|
|=||(1687 - 0||-||4501)||/||42003|
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.
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