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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 7 years, the highest Beneish M-Score of AbbVie Inc was -2.00. The lowest was -2.93. And the median was -2.71.
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 * 1.1058||+||0.528 * 0.969||+||0.404 * 1.9808||+||0.892 * 1.1452||+||0.115 * 0.9776|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.722||+||4.679 * -0.0412||-||0.327 * 0.9491|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $4,730 Mil.|
Revenue was 6400 + 5944 + 5475 + 5040 = $22,859 Mil.
Gross Profit was 4925 + 4777 + 4559 + 4098 = $18,359 Mil.
Total Current Assets was $16,314 Mil.
Total Assets was $53,050 Mil.
Property, Plant and Equipment(Net PPE) was $2,565 Mil.
Depreciation, Depletion and Amortization(DDA) was $836 Mil.
Selling, General & Admin. Expense(SGA) was $6,387 Mil.
Total Current Liabilities was $10,894 Mil.
Long-Term Debt was $29,240 Mil.
Net Income was 1517 + 1239 + 1366 + 1022 = $5,144 Mil.
Non Operating Income was 10 + -41 + -10 + -165 = $-206 Mil.
Cash Flow from Operations was 1963 + 2155 + 1832 + 1585 = $7,535 Mil.
|Accounts Receivable was $3,735 Mil.
Revenue was 5452 + 5019 + 4926 + 4563 = $19,960 Mil.
Gross Profit was 4333 + 3925 + 3813 + 3463 = $15,534 Mil.
Total Current Assets was $16,081 Mil.
Total Assets was $27,513 Mil.
Property, Plant and Equipment(Net PPE) was $2,485 Mil.
Depreciation, Depletion and Amortization(DDA) was $786 Mil.
Selling, General & Admin. Expense(SGA) was $7,724 Mil.
Total Current Liabilities was $11,393 Mil.
Long-Term Debt was $10,538 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)|
|=||(4730 / 22859)||/||(3735 / 19960)|
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)|
|=||(4777 / 19960)||/||(4925 / 22859)|
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 - (16314 + 2565) / 53050)||/||(1 - (16081 + 2485) / 27513)|
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))|
|=||(786 / (786 + 2485))||/||(836 / (836 + 2565))|
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)|
|=||(6387 / 22859)||/||(7724 / 19960)|
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)|
|=||((29240 + 10894) / 53050)||/||((10538 + 11393) / 27513)|
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|
|=||(5144 - -206||-||7535)||/||53050|
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 -2.00 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