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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 Aetna Inc was -1.38. The lowest was -2.94. And the median was -2.64.
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 Aetna 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 * 0.8764||+||0.528 * 0.9512||+||0.404 * 0.9773||+||0.892 * 1.0402||+||0.115 * 0.9386|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0333||+||4.679 * -0.0228||-||0.327 * 1.0039|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $4,457 Mil.|
Revenue was 15048.5 + 14953 + 15240.9 + 15094.1 = $60,337 Mil.
Gross Profit was 3958.3 + 4014.7 + 4205.4 + 4325.5 = $16,504 Mil.
Total Current Assets was $12,739 Mil.
Total Assets was $53,424 Mil.
Property, Plant and Equipment(Net PPE) was $630 Mil.
Depreciation, Depletion and Amortization(DDA) was $671 Mil.
Selling, General & Admin. Expense(SGA) was $11,649 Mil.
Total Current Liabilities was $15,482 Mil.
Long-Term Debt was $7,828 Mil.
Net Income was 320.8 + 560.1 + 731.8 + 777.5 = $2,390 Mil.
Non Operating Income was -63.4 + -65.1 + -63.7 + -63.2 = $-255 Mil.
Cash Flow from Operations was 1110.5 + 1026.5 + 255.7 + 1473.4 = $3,866 Mil.
|Accounts Receivable was $4,889 Mil.
Revenue was 14771.2 + 14727.8 + 14509.4 + 13994.8 = $58,003 Mil.
Gross Profit was 3731 + 3851.7 + 3669 + 3839.8 = $15,092 Mil.
Total Current Assets was $11,764 Mil.
Total Assets was $53,402 Mil.
Property, Plant and Equipment(Net PPE) was $670 Mil.
Depreciation, Depletion and Amortization(DDA) was $629 Mil.
Selling, General & Admin. Expense(SGA) was $10,838 Mil.
Total Current Liabilities was $15,357 Mil.
Long-Term Debt was $7,852 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)|
|=||(4456.7 / 60336.5)||/||(4888.5 / 58003.2)|
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)|
|=||(4014.7 / 58003.2)||/||(3958.3 / 60336.5)|
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 - (12738.5 + 629.7) / 53424.1)||/||(1 - (11764 + 669.8) / 53402.1)|
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))|
|=||(629 / (629 + 669.8))||/||(671.3 / (671.3 + 629.7))|
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)|
|=||(11649.3 / 60336.5)||/||(10837.7 / 58003.2)|
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)|
|=||((7828 + 15481.5) / 53424.1)||/||((7852 + 15356.5) / 53402.1)|
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|
|=||(2390.2 - -255.4||-||3866.1)||/||53424.1|
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.
Aetna Inc has a M-score of -2.71 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
Aetna Inc Annual Data
Aetna Inc Quarterly Data