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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 * 1.6085||+||0.528 * 0.8566||+||0.404 * 1.4579||+||0.892 * 1.7528||+||0.115 * 0.8254|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3337||+||4.679 * -0.04||-||0.327 * 0.6113|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $4,420 Mil.|
Revenue was 5755 + 4234.2 + 4056.9 + 3683.1 = $17,729 Mil.
Gross Profit was 3624.9 + 2520.8 + 2225.6 + 1800.1 = $10,171 Mil.
Total Current Assets was $10,487 Mil.
Total Assets was $138,411 Mil.
Property, Plant and Equipment(Net PPE) was $2,859 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,608 Mil.
Selling, General & Admin. Expense(SGA) was $5,362 Mil.
Total Current Liabilities was $7,650 Mil.
Long-Term Debt was $41,319 Mil.
Net Income was -243.1 + -512 + -732.9 + -1042.8 = $-2,531 Mil.
Non Operating Income was -48.7 + -198 + -42.6 + 31.9 = $-257 Mil.
Cash Flow from Operations was 1401.3 + 525 + 811.6 + 522.3 = $3,260 Mil.
|Accounts Receivable was $1,568 Mil.
Revenue was 2667.2 + 2655.1 + 2779.3 + 2013 = $10,115 Mil.
Gross Profit was 1370.7 + 1362.1 + 1307.7 + 930.1 = $4,971 Mil.
Total Current Assets was $8,273 Mil.
Total Assets was $25,789 Mil.
Property, Plant and Equipment(Net PPE) was $1,533 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,591 Mil.
Selling, General & Admin. Expense(SGA) was $2,294 Mil.
Total Current Liabilities was $4,183 Mil.
Long-Term Debt was $10,743 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)|
|=||(4420.1 / 17729.2)||/||(1567.7 / 10114.6)|
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)|
|=||(2520.8 / 10114.6)||/||(3624.9 / 17729.2)|
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 - (10486.9 + 2859) / 138411.1)||/||(1 - (8272.9 + 1532.9) / 25789.4)|
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))|
|=||(1591.3 / (1591.3 + 1532.9))||/||(4607.6 / (4607.6 + 2859))|
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)|
|=||(5362.4 / 17729.2)||/||(2293.9 / 10114.6)|
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)|
|=||((41319.4 + 7649.5) / 138411.1)||/||((10742.6 + 4183.4) / 25789.4)|
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|
|=||(-2530.8 - -257.4||-||3260.2)||/||138411.1|
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.
Allergan PLC has a M-score of -1.28 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