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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.
Allergan Inc has a M-score of -2.61 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Allergan Inc was -1.79. The lowest was -3.94. And the median was -2.67.
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 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 * 0.9902||+||0.528 * 0.99||+||0.404 * 0.8613||+||0.892 * 1.1265||+||0.115 * 1.1653|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0229||+||4.679 * -0.047||-||0.327 * 0.9103|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $990 Mil.|
Revenue was 1646.1 + 1684.4 + 1558.7 + 1597.7 = $6,487 Mil.
Gross Profit was 1441.6 + 1479.8 + 1366.5 + 1398.6 = $5,687 Mil.
Total Current Assets was $5,459 Mil.
Total Assets was $10,720 Mil.
Property, Plant and Equipment(Net PPE) was $942 Mil.
Depreciation, Depletion and Amortization(DDA) was $242 Mil.
Selling, General & Admin. Expense(SGA) was $2,573 Mil.
Total Current Liabilities was $1,248 Mil.
Long-Term Debt was $2,095 Mil.
Net Income was 257.3 + 312.9 + 299.8 + 359.9 = $1,230 Mil.
Non Operating Income was -6.4 + 2.7 + -15.5 + 11.2 = $-8 Mil.
Cash Flow from Operations was 165.8 + 515.3 + 579 + 481.5 = $1,742 Mil.
|Accounts Receivable was $888 Mil.
Revenue was 1459.6 + 1472.1 + 1376.5 + 1450.1 = $5,758 Mil.
Gross Profit was 1259.7 + 1289.1 + 1193.6 + 1254.8 = $4,997 Mil.
Total Current Assets was $4,070 Mil.
Total Assets was $9,251 Mil.
Property, Plant and Equipment(Net PPE) was $854 Mil.
Depreciation, Depletion and Amortization(DDA) was $267 Mil.
Selling, General & Admin. Expense(SGA) was $2,233 Mil.
Total Current Liabilities was $1,062 Mil.
Long-Term Debt was $2,108 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)|
|=||(990.4 / 6486.9)||/||(887.9 / 5758.3)|
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)|
|=||(1479.8 / 5758.3)||/||(1441.6 / 6486.9)|
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 - (5458.7 + 942.3) / 10720.2)||/||(1 - (4069.5 + 853.9) / 9250.5)|
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))|
|=||(267 / (267 + 853.9))||/||(242.1 / (242.1 + 942.3))|
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)|
|=||(2573.2 / 6486.9)||/||(2233.1 / 5758.3)|
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)|
|=||((2095.1 + 1248.1) / 10720.2)||/||((2107.7 + 1061.5) / 9250.5)|
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|
|=||(1229.9 - -8||-||1741.6)||/||10720.2|
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 Inc has a M-score of -2.61 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
Allergan Inc Annual Data
Allergan Inc Quarterly Data