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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 -2.65.
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 * 2.3905||+||0.528 * 0.9544||+||0.404 * 0.977||+||0.892 * 1.0934||+||0.115 * 0.9676|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0575||+||4.679 * -0.0218||-||0.327 * 1.0202|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $5,893 Mil.|
Revenue was 15240.9 + 15094.1 + 14771.2 + 14727.8 = $59,834 Mil.
Gross Profit was 4205.4 + 4325.5 + 3731 + 3851.7 = $16,114 Mil.
Total Current Assets was $12,982 Mil.
Total Assets was $54,641 Mil.
Property, Plant and Equipment(Net PPE) was $653 Mil.
Depreciation, Depletion and Amortization(DDA) was $648 Mil.
Selling, General & Admin. Expense(SGA) was $11,405 Mil.
Total Current Liabilities was $15,802 Mil.
Long-Term Debt was $7,840 Mil.
Net Income was 731.8 + 777.5 + 232 + 594.5 = $2,336 Mil.
Non Operating Income was -63.7 + -63.2 + 700.1 + -59.5 = $514 Mil.
Cash Flow from Operations was 255.7 + 1473.4 + 294.1 + 987.4 = $3,011 Mil.
|Accounts Receivable was $2,254 Mil.
Revenue was 14509.4 + 13994.8 + 13182.7 + 13035.6 = $54,723 Mil.
Gross Profit was 3669 + 3839.8 + 3293.1 + 3262.6 = $14,065 Mil.
Total Current Assets was $11,647 Mil.
Total Assets was $53,161 Mil.
Property, Plant and Equipment(Net PPE) was $680 Mil.
Depreciation, Depletion and Amortization(DDA) was $632 Mil.
Selling, General & Admin. Expense(SGA) was $9,863 Mil.
Total Current Liabilities was $14,933 Mil.
Long-Term Debt was $7,612 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)|
|=||(5892.5 / 59834)||/||(2254.4 / 54722.5)|
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)|
|=||(4325.5 / 54722.5)||/||(4205.4 / 59834)|
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 - (12982.1 + 653.2) / 54641.1)||/||(1 - (11647.1 + 680.2) / 53160.7)|
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))|
|=||(632.4 / (632.4 + 680.2))||/||(647.8 / (647.8 + 653.2))|
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)|
|=||(11404.6 / 59834)||/||(9863.4 / 54722.5)|
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)|
|=||((7840.1 + 15801.5) / 54641.1)||/||((7612.4 + 14932.7) / 53160.7)|
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|
|=||(2335.8 - 513.7||-||3010.6)||/||54641.1|
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 -1.27 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
Aetna Inc Annual Data
Aetna Inc Quarterly Data