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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 -2.62 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 -2.66.
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 * 0.9249||+||0.528 * 0.9913||+||0.404 * 0.9116||+||0.892 * 1.1517||+||0.115 * 1.1699|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.039||+||4.679 * -0.0405||-||0.327 * 0.9646|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $967 Mil.|
Revenue was 1817.1 + 1864.2 + 1646.1 + 1684.4 = $7,012 Mil.
Gross Profit was 1610.5 + 1642 + 1441.6 + 1479.8 = $6,174 Mil.
Total Current Assets was $6,104 Mil.
Total Assets was $11,646 Mil.
Property, Plant and Equipment(Net PPE) was $1,005 Mil.
Depreciation, Depletion and Amortization(DDA) was $245 Mil.
Selling, General & Admin. Expense(SGA) was $2,808 Mil.
Total Current Liabilities was $1,567 Mil.
Long-Term Debt was $2,089 Mil.
Net Income was 312.5 + 417.2 + 257.3 + 312.9 = $1,300 Mil.
Non Operating Income was 43 + -16.2 + -6.4 + 2.7 = $23 Mil.
Cash Flow from Operations was 594.5 + 473.3 + 165.8 + 515.3 = $1,749 Mil.
|Accounts Receivable was $908 Mil.
Revenue was 1558.7 + 1597.7 + 1459.6 + 1472.1 = $6,088 Mil.
Gross Profit was 1366.5 + 1398.6 + 1259.7 + 1289.1 = $5,314 Mil.
Total Current Assets was $4,932 Mil.
Total Assets was $10,145 Mil.
Property, Plant and Equipment(Net PPE) was $877 Mil.
Depreciation, Depletion and Amortization(DDA) was $260 Mil.
Selling, General & Admin. Expense(SGA) was $2,346 Mil.
Total Current Liabilities was $1,200 Mil.
Long-Term Debt was $2,102 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)|
|=||(967.4 / 7011.8)||/||(908.2 / 6088.1)|
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)|
|=||(1642 / 6088.1)||/||(1610.5 / 7011.8)|
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 - (6103.8 + 1005.3) / 11645.8)||/||(1 - (4932.4 + 877) / 10144.6)|
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))|
|=||(260.3 / (260.3 + 877))||/||(244.5 / (244.5 + 1005.3))|
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)|
|=||(2807.6 / 7011.8)||/||(2346.3 / 6088.1)|
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)|
|=||((2088.6 + 1567) / 11645.8)||/||((2101.5 + 1199.7) / 10144.6)|
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|
|=||(1299.9 - 23.1||-||1748.9)||/||11645.8|
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 -2.62 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