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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 -0.96. The lowest was -3.55. 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 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 * 1.7058||+||0.528 * 0.8897||+||0.404 * 1.2397||+||0.892 * 1.5515||+||0.115 * 0.8367|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3113||+||4.679 * -0.031||-||0.327 * 0.7062|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $3,993 Mil.|
Revenue was 4234.2 + 4056.9 + 3683.1 + 2667.2 = $14,641 Mil.
Gross Profit was 2520.8 + 2225.6 + 1800.1 + 1370.7 = $7,917 Mil.
Total Current Assets was $11,017 Mil.
Total Assets was $139,461 Mil.
Property, Plant and Equipment(Net PPE) was $2,798 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,331 Mil.
Selling, General & Admin. Expense(SGA) was $4,463 Mil.
Total Current Liabilities was $7,656 Mil.
Long-Term Debt was $42,701 Mil.
Net Income was -512 + -732.9 + -1042.8 + 48.7 = $-2,239 Mil.
Non Operating Income was -198 + -42.6 + 31.9 + -35.8 = $-245 Mil.
Cash Flow from Operations was 525 + 811.6 + 522.3 + 469.5 = $2,328 Mil.
|Accounts Receivable was $1,509 Mil.
Revenue was 2655.1 + 2779.3 + 2013 + 1989.8 = $9,437 Mil.
Gross Profit was 1362.1 + 1308.7 + 929.8 + 939.5 = $4,540 Mil.
Total Current Assets was $4,541 Mil.
Total Assets was $22,404 Mil.
Property, Plant and Equipment(Net PPE) was $1,581 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,319 Mil.
Selling, General & Admin. Expense(SGA) was $2,194 Mil.
Total Current Liabilities was $3,002 Mil.
Long-Term Debt was $8,452 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)|
|=||(3992.8 / 14641.4)||/||(1508.7 / 9437.2)|
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)|
|=||(2225.6 / 9437.2)||/||(2520.8 / 14641.4)|
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 - (11017.2 + 2797.9) / 139460.7)||/||(1 - (4540.7 + 1581.3) / 22403.9)|
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))|
|=||(1318.7 / (1318.7 + 1581.3))||/||(3331.2 / (3331.2 + 2797.9))|
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)|
|=||(4462.8 / 14641.4)||/||(2193.7 / 9437.2)|
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)|
|=||((42700.5 + 7655.5) / 139460.7)||/||((8452.2 + 3002.1) / 22403.9)|
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|
|=||(-2239 - -244.5||-||2328.4)||/||139460.7|
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 -1.42 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