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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 0.31. The lowest was -3.51. 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 * 1.2202||+||0.528 * 0.9584||+||0.404 * 0.9821||+||0.892 * 1.0646||+||0.115 * 0.9475|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0533||+||4.679 * -0.0235||-||0.327 * 1.0248|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $4,457 Mil.|
Revenue was 14953 + 15240.9 + 15094.1 + 14771.2 = $60,059 Mil.
Gross Profit was 4014.7 + 4205.4 + 4325.5 + 3731 = $16,277 Mil.
Total Current Assets was $12,347 Mil.
Total Assets was $53,478 Mil.
Property, Plant and Equipment(Net PPE) was $629 Mil.
Depreciation, Depletion and Amortization(DDA) was $660 Mil.
Selling, General & Admin. Expense(SGA) was $11,520 Mil.
Total Current Liabilities was $15,152 Mil.
Long-Term Debt was $7,834 Mil.
Net Income was 560.1 + 731.8 + 777.5 + 232 = $2,301 Mil.
Non Operating Income was -65.1 + -63.7 + -63.2 + 700.1 = $508 Mil.
Cash Flow from Operations was 1026.5 + 255.7 + 1473.4 + 294.1 = $3,050 Mil.
|Accounts Receivable was $3,431 Mil.
Revenue was 14727.8 + 14509.4 + 13994.8 + 13182.7 = $56,415 Mil.
Gross Profit was 3851.7 + 3669 + 3839.8 + 3293.1 = $14,654 Mil.
Total Current Assets was $11,465 Mil.
Total Assets was $53,026 Mil.
Property, Plant and Equipment(Net PPE) was $669 Mil.
Depreciation, Depletion and Amortization(DDA) was $630 Mil.
Selling, General & Admin. Expense(SGA) was $10,274 Mil.
Total Current Liabilities was $14,633 Mil.
Long-Term Debt was $7,606 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)|
|=||(4457 / 60059.2)||/||(3431 / 56414.7)|
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)|
|=||(4205.4 / 56414.7)||/||(4014.7 / 60059.2)|
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 - (12347.3 + 629.3) / 53478.4)||/||(1 - (11464.9 + 668.9) / 53025.6)|
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))|
|=||(630.3 / (630.3 + 668.9))||/||(660.3 / (660.3 + 629.3))|
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)|
|=||(11520.2 / 60059.2)||/||(10273.6 / 56414.7)|
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)|
|=||((7834 + 15152.1) / 53478.4)||/||((7606.3 + 14632.6) / 53025.6)|
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|
|=||(2301.4 - 508.1||-||3049.7)||/||53478.4|
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 -2.38 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