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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.
ABB, Ltd. has a M-score of -2.82 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of ABB, Ltd. was -2.17. The lowest was -2.82. And the median was -2.54.
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 * 0.6167||+||0.528 * 1.0094||+||0.404 * 1.0388||+||0.892 * 1.0639||+||0.115 * 0.9525|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9952||+||4.679 * -0.018||-||0.327 * 0.9338|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $7,594 Mil.|
Revenue was 11373 + 10535 + 10225 + 9715 = $41,848 Mil.
Gross Profit was 2942 + 3174 + 3025 + 2851 = $11,992 Mil.
Total Current Assets was $26,425 Mil.
Total Assets was $48,064 Mil.
Property, Plant and Equipment(Net PPE) was $6,254 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,318 Mil.
Selling, General & Admin. Expense(SGA) was $6,094 Mil.
Total Current Liabilities was $16,675 Mil.
Long-Term Debt was $7,570 Mil.
Net Income was 525 + 835 + 763 + 664 = $2,787 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 2092 + 1241 + 543 + -223 = $3,653 Mil.
|Accounts Receivable was $11,575 Mil.
Revenue was 11021 + 9745 + 9663 + 8907 = $39,336 Mil.
Gross Profit was 2923 + 2923 + 2842 + 2690 = $11,378 Mil.
Total Current Assets was $28,002 Mil.
Total Assets was $49,070 Mil.
Property, Plant and Equipment(Net PPE) was $5,947 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,182 Mil.
Selling, General & Admin. Expense(SGA) was $5,756 Mil.
Total Current Liabilities was $18,974 Mil.
Long-Term Debt was $7,534 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)|
|=||(7594 / 41848)||/||(11575 / 39336)|
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)|
|=||(3174 / 39336)||/||(2942 / 41848)|
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 - (26425 + 6254) / 48064)||/||(1 - (28002 + 5947) / 49070)|
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))|
|=||(1182 / (1182 + 5947))||/||(1318 / (1318 + 6254))|
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)|
|=||(6094 / 41848)||/||(5756 / 39336)|
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)|
|=||((7570 + 16675) / 48064)||/||((7534 + 18974) / 49070)|
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|
|=||(2787 - 0||-||3653)||/||48064|
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 -2.82 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