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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 6 years, the highest Beneish M-Score of AbbVie Inc was -2.07. The lowest was -2.93. And the median was -2.69.
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 AbbVie Inc 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 * 1.0252||+||0.528 * 0.9448||+||0.404 * 2.1067||+||0.892 * 1.1168||+||0.115 * 1.061|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2271||+||4.679 * -0.0225||-||0.327 * 0.9878|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $4,574 Mil.|
Revenue was 5944 + 5475 + 5040 + 5452 = $21,911 Mil.
Gross Profit was 4777 + 4559 + 4098 + 4333 = $17,767 Mil.
Total Current Assets was $17,912 Mil.
Total Assets was $54,832 Mil.
Property, Plant and Equipment(Net PPE) was $2,546 Mil.
Depreciation, Depletion and Amortization(DDA) was $768 Mil.
Selling, General & Admin. Expense(SGA) was $7,991 Mil.
Total Current Liabilities was $8,813 Mil.
Long-Term Debt was $31,359 Mil.
Net Income was 1239 + 1366 + 1022 + -810 = $2,817 Mil.
Non Operating Income was 41 + -10 + -165 + -809 = $-943 Mil.
Cash Flow from Operations was 2155 + 1832 + 1585 + -578 = $4,994 Mil.
|Accounts Receivable was $3,995 Mil.
Revenue was 5019 + 4926 + 4563 + 5111 = $19,619 Mil.
Gross Profit was 3925 + 3813 + 3463 + 3829 = $15,030 Mil.
Total Current Assets was $17,555 Mil.
Total Assets was $28,454 Mil.
Property, Plant and Equipment(Net PPE) was $2,432 Mil.
Depreciation, Depletion and Amortization(DDA) was $793 Mil.
Selling, General & Admin. Expense(SGA) was $5,831 Mil.
Total Current Liabilities was $6,635 Mil.
Long-Term Debt was $14,469 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)|
|=||(4574 / 21911)||/||(3995 / 19619)|
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)|
|=||(4559 / 19619)||/||(4777 / 21911)|
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 - (17912 + 2546) / 54832)||/||(1 - (17555 + 2432) / 28454)|
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))|
|=||(793 / (793 + 2432))||/||(768 / (768 + 2546))|
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)|
|=||(7991 / 21911)||/||(5831 / 19619)|
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)|
|=||((31359 + 8813) / 54832)||/||((14469 + 6635) / 28454)|
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|
|=||(2817 - -943||-||4994)||/||54832|
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.
AbbVie Inc has a M-score of -2.07 signals that the company is likely to 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
AbbVie Inc Annual Data
AbbVie Inc Quarterly Data