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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 Inc was -2.02. The lowest was -3.54. And the median was -2.65.
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 * 0.9012||+||0.528 * 0.9888||+||0.404 * 0.8924||+||0.892 * 1.1488||+||0.115 * 1.0929|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9803||+||4.679 * -0.0359||-||0.327 * 0.9281|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $915 Mil.|
Revenue was 1910.5 + 1817.1 + 1864.2 + 1646.1 = $7,238 Mil.
Gross Profit was 1701.4 + 1610.5 + 1642 + 1441.6 = $6,396 Mil.
Total Current Assets was $6,871 Mil.
Total Assets was $12,416 Mil.
Property, Plant and Equipment(Net PPE) was $1,006 Mil.
Depreciation, Depletion and Amortization(DDA) was $248 Mil.
Selling, General & Admin. Expense(SGA) was $2,837 Mil.
Total Current Liabilities was $1,557 Mil.
Long-Term Debt was $2,085 Mil.
Net Income was 537.2 + 312.5 + 417.2 + 257.3 = $1,524 Mil.
Non Operating Income was 21.3 + 43 + -16.2 + -6.4 = $42 Mil.
Cash Flow from Operations was 694.2 + 594.5 + 473.3 + 165.8 = $1,928 Mil.
|Accounts Receivable was $883 Mil.
Revenue was 1684.4 + 1558.7 + 1597.7 + 1459.6 = $6,300 Mil.
Gross Profit was 1479.8 + 1366.5 + 1398.6 + 1259.7 = $5,505 Mil.
Total Current Assets was $5,320 Mil.
Total Assets was $10,574 Mil.
Property, Plant and Equipment(Net PPE) was $923 Mil.
Depreciation, Depletion and Amortization(DDA) was $255 Mil.
Selling, General & Admin. Expense(SGA) was $2,519 Mil.
Total Current Liabilities was $1,244 Mil.
Long-Term Debt was $2,098 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)|
|=||(914.5 / 7237.9)||/||(883.3 / 6300.4)|
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)|
|=||(1610.5 / 6300.4)||/||(1701.4 / 7237.9)|
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 - (6871.2 + 1006.3) / 12415.7)||/||(1 - (5319.7 + 923.2) / 10574.3)|
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))|
|=||(254.6 / (254.6 + 923.2))||/||(248.1 / (248.1 + 1006.3))|
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)|
|=||(2837.2 / 7237.9)||/||(2519.4 / 6300.4)|
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)|
|=||((2085.3 + 1557.3) / 12415.7)||/||((2098.3 + 1244.3) / 10574.3)|
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|
|=||(1524.2 - 41.7||-||1927.8)||/||12415.7|
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 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