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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 -0.95. The lowest was -3.56. And the median was -2.53.
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 * 0.7907||+||0.528 * 0.9289||+||0.404 * 0.8806||+||0.892 * 1.4154||+||0.115 * 0.9559|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8453||+||4.679 * 0.0772||-||0.327 * 0.7992|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $2,399 Mil.|
Revenue was 3622.2 + 3684.8 + 3795.9 + 5989.8 = $17,093 Mil.
Gross Profit was 3160 + 3243.3 + 2984.1 + 3329.4 = $12,717 Mil.
Total Current Assets was $31,724 Mil.
Total Assets was $143,608 Mil.
Property, Plant and Equipment(Net PPE) was $1,566 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,573 Mil.
Selling, General & Admin. Expense(SGA) was $4,980 Mil.
Total Current Liabilities was $8,026 Mil.
Long-Term Debt was $31,178 Mil.
Net Income was 15220 + -501.7 + 255.7 + -630.9 = $14,343 Mil.
Non Operating Income was 33.6 + 150.1 + 0.5 + 4.3 = $189 Mil.
Cash Flow from Operations was -1092.4 + 1382.5 + 1218.5 + 1555.5 = $3,064 Mil.
|Accounts Receivable was $2,143 Mil.
Revenue was 3469.5 + 3628.7 + 2562.6 + 2415.6 = $12,076 Mil.
Gross Profit was 2759.2 + 2710.9 + 1542.5 + 1333.4 = $8,346 Mil.
Total Current Assets was $16,659 Mil.
Total Assets was $142,816 Mil.
Property, Plant and Equipment(Net PPE) was $1,570 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,315 Mil.
Selling, General & Admin. Expense(SGA) was $4,162 Mil.
Total Current Liabilities was $8,133 Mil.
Long-Term Debt was $40,648 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)|
|=||(2398.5 / 17092.7)||/||(2143.2 / 12076.4)|
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)|
|=||(8346 / 12076.4)||/||(12716.8 / 17092.7)|
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 - (31723.9 + 1566.3) / 143607.7)||/||(1 - (16658.7 + 1569.9) / 142816.3)|
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))|
|=||(5314.7 / (5314.7 + 1569.9))||/||(6572.9 / (6572.9 + 1566.3))|
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)|
|=||(4980 / 17092.7)||/||(4162.2 / 12076.4)|
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)|
|=||((31178.2 + 8025.5) / 143607.7)||/||((40648.1 + 8133) / 142816.3)|
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|
|=||(14343.1 - 188.5||-||3064.1)||/||143607.7|
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 -1.94 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