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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 1.63. The lowest was -3.10. And the median was -2.58.
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 * 1.0934||+||0.528 * 1.0185||+||0.404 * 0.7594||+||0.892 * 1.0402||+||0.115 * 0.9595|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9751||+||4.679 * -0.0441||-||0.327 * 1.2738|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $5,069 Mil.|
Revenue was 15781.5 + 15952.3 + 15693.4 + 15048.5 = $62,476 Mil.
Gross Profit was 4154.8 + 4194.7 + 4316.8 + 3958.3 = $16,625 Mil.
Total Current Assets was $29,943 Mil.
Total Assets was $71,883 Mil.
Property, Plant and Equipment(Net PPE) was $597 Mil.
Depreciation, Depletion and Amortization(DDA) was $683 Mil.
Selling, General & Admin. Expense(SGA) was $11,682 Mil.
Total Current Liabilities was $19,336 Mil.
Long-Term Debt was $20,022 Mil.
Net Income was 603.9 + 790.8 + 726.6 + 320.8 = $2,442 Mil.
Non Operating Income was -61.4 + 65.7 + -62.8 + -63.4 = $-122 Mil.
Cash Flow from Operations was 2411.2 + 428.9 + 1780.9 + 1110.5 = $5,732 Mil.
|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 $11,517 Mil.
Total Current Liabilities was $15,152 Mil.
Long-Term Debt was $7,834 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)|
|=||(5069.3 / 62475.7)||/||(4457 / 60059.2)|
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)|
|=||(16276.6 / 60059.2)||/||(16624.6 / 62475.7)|
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 - (29943.4 + 597) / 71882.6)||/||(1 - (12347.3 + 629.3) / 53478.4)|
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))|
|=||(660.3 / (660.3 + 629.3))||/||(683.1 / (683.1 + 597))|
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)|
|=||(11681.6 / 62475.7)||/||(11516.5 / 60059.2)|
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)|
|=||((20022.1 + 19335.5) / 71882.6)||/||((7834 + 15152.1) / 53478.4)|
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|
|=||(2442.1 - -121.9||-||5731.5)||/||71882.6|
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 -2.74 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