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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 -1.74. The lowest was -2.92. 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 * 1.0031||+||0.528 * 0.9872||+||0.404 * 0.9682||+||0.892 * 1.2264||+||0.115 * 0.9102|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0221||+||4.679 * -0.0329||-||0.327 * 1.0231|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|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 $14,279 Mil.
Net Income was 232 + 594.5 + 548.8 + 665.5 = $2,041 Mil.
Non Operating Income was 700.1 + -59.5 + -61.9 + -154.1 = $425 Mil.
Cash Flow from Operations was 294.1 + 987.4 + 669.1 + 1422.2 = $3,373 Mil.
|Accounts Receivable was $3,974 Mil.
Revenue was 13182.7 + 13035.6 + 11537.4 + 9538.9 = $47,295 Mil.
Gross Profit was 3293.1 + 3262.6 + 2991.4 + 2600.1 = $12,147 Mil.
Total Current Assets was $9,612 Mil.
Total Assets was $49,765 Mil.
Property, Plant and Equipment(Net PPE) was $722 Mil.
Depreciation, Depletion and Amortization(DDA) was $569 Mil.
Selling, General & Admin. Expense(SGA) was $8,645 Mil.
Total Current Liabilities was $12,473 Mil.
Long-Term Debt was $14,522 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)|
|=||(4888.5 / 58003.2)||/||(3973.8 / 47294.6)|
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)|
|=||(3851.7 / 47294.6)||/||(3731 / 58003.2)|
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 - (11764 + 669.8) / 53402.1)||/||(1 - (9611.9 + 721.9) / 49764.8)|
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))|
|=||(569.1 / (569.1 + 721.9))||/||(629 / (629 + 669.8))|
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)|
|=||(10837.7 / 58003.2)||/||(8645.4 / 47294.6)|
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)|
|=||((14279.4 + 15356.5) / 53402.1)||/||((14522.1 + 12473) / 49764.8)|
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|
|=||(2040.8 - 424.6||-||3372.8)||/||53402.1|
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 -2.47 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