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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 * 1.0094||+||0.528 * 0.9926||+||0.404 * 1.0304||+||0.892 * 0.9699||+||0.115 * 0.9344|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0041||+||4.679 * -0.049||-||0.327 * 0.9968|
|This Year (Mar17) TTM:||Last Year (Mar16) TTM:|
|Accounts Receivable was $9,918 Mil.|
Revenue was 7854 + 8993 + 8255 + 8677 = $33,779 Mil.
Gross Profit was 2373 + 2515 + 2459 + 2415 = $9,762 Mil.
Total Current Assets was $22,207 Mil.
Total Assets was $40,306 Mil.
Property, Plant and Equipment(Net PPE) was $4,805 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,118 Mil.
Selling, General & Admin. Expense(SGA) was $5,390 Mil.
Total Current Liabilities was $15,153 Mil.
Long-Term Debt was $5,885 Mil.
Net Income was 724 + 425 + 568 + 406 = $2,123 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 509 + 1428 + 1081 + 1082 = $4,100 Mil.
|Accounts Receivable was $10,131 Mil.
Revenue was 7903 + 9242 + 8519 + 9165 = $34,829 Mil.
Gross Profit was 2358 + 2395 + 2518 + 2720 = $9,991 Mil.
Total Current Assets was $23,083 Mil.
Total Assets was $41,814 Mil.
Property, Plant and Equipment(Net PPE) was $5,347 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,145 Mil.
Selling, General & Admin. Expense(SGA) was $5,535 Mil.
Total Current Liabilities was $15,770 Mil.
Long-Term Debt was $6,126 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)|
|=||(9918 / 33779)||/||(10131 / 34829)|
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)|
|=||(9991 / 34829)||/||(9762 / 33779)|
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 - (22207 + 4805) / 40306)||/||(1 - (23083 + 5347) / 41814)|
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))|
|=||(1145 / (1145 + 5347))||/||(1118 / (1118 + 4805))|
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)|
|=||(5390 / 33779)||/||(5535 / 34829)|
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)|
|=||((5885 + 15153) / 40306)||/||((6126 + 15770) / 41814)|
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|
|=||(2123 - 0||-||4100)||/||40306|
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