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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 Allergan PLC was 3.71. The lowest was -3.49. And the median was -2.30.
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 Allergan PLC 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 * 1.2868||+||0.528 * 0.7745||+||0.404 * 0.9179||+||0.892 * 0.819||+||0.115 * 0.9845|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.104||+||4.679 * 0.1033||-||0.327 * 0.8197|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $2,531 Mil.|
Revenue was 3864.3 + 3622.2 + 3684.8 + 3795.9 = $14,967 Mil.
Gross Profit was 3384.6 + 3160 + 3243.3 + 2984.1 = $12,772 Mil.
Total Current Assets was $17,858 Mil.
Total Assets was $128,986 Mil.
Property, Plant and Equipment(Net PPE) was $1,611 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,631 Mil.
Selling, General & Admin. Expense(SGA) was $4,782 Mil.
Total Current Liabilities was $7,875 Mil.
Long-Term Debt was $29,971 Mil.
Net Income was -0.6 + 15220 + -501.7 + 255.7 = $14,973 Mil.
Non Operating Income was 35 + 33.6 + 150.1 + 0.5 = $219 Mil.
Cash Flow from Operations was -83.3 + -1092.4 + 1382.5 + 1218.5 = $1,425 Mil.
|Accounts Receivable was $2,402 Mil.
Revenue was 4197.5 + 4088.9 + 5755 + 4234.2 = $18,276 Mil.
Gross Profit was 3087 + 2846 + 3624.9 + 2520.8 = $12,079 Mil.
Total Current Assets was $8,615 Mil.
Total Assets was $135,841 Mil.
Property, Plant and Equipment(Net PPE) was $1,574 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,995 Mil.
Selling, General & Admin. Expense(SGA) was $5,289 Mil.
Total Current Liabilities was $8,328 Mil.
Long-Term Debt was $40,293 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)|
|=||(2531 / 14967.2)||/||(2401.6 / 18275.6)|
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)|
|=||(12078.7 / 18275.6)||/||(12772 / 14967.2)|
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 - (17857.9 + 1611.3) / 128986.3)||/||(1 - (8615.4 + 1573.9) / 135840.7)|
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))|
|=||(5995.3 / (5995.3 + 1573.9))||/||(6631 / (6631 + 1611.3))|
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)|
|=||(4782.4 / 14967.2)||/||(5289.4 / 18275.6)|
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)|
|=||((29970.8 + 7874.7) / 128986.3)||/||((40293.4 + 8328.3) / 135840.7)|
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|
|=||(14973.4 - 219.2||-||1425.3)||/||128986.3|
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.
Allergan PLC has a M-score of -2.01 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
Allergan PLC Annual Data
Allergan PLC Quarterly Data