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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 -2.54.
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 * 0.3844||+||0.528 * 0.79||+||0.404 * 1.0207||+||0.892 * 1.4657||+||0.115 * 0.7634|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7896||+||4.679 * -0.0071||-||0.327 * 0.9792|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2,491 Mil.|
Revenue was 3684.8 + 3795.9 + 4197.5 + 4088.9 = $15,767 Mil.
Gross Profit was 3243.3 + 2984.1 + 3087 + 2846 = $12,160 Mil.
Total Current Assets was $8,755 Mil.
Total Assets was $132,619 Mil.
Property, Plant and Equipment(Net PPE) was $1,557 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,568 Mil.
Selling, General & Admin. Expense(SGA) was $4,748 Mil.
Total Current Liabilities was $8,867 Mil.
Long-Term Debt was $37,075 Mil.
Net Income was -501.7 + 255.7 + -630.9 + 5301.2 = $4,424 Mil.
Non Operating Income was 150.1 + 0.5 + 4.3 + 0.2 = $155 Mil.
Cash Flow from Operations was 1382.5 + 1218.5 + 1555.5 + 1048.2 = $5,205 Mil.
|Accounts Receivable was $4,420 Mil.
Revenue was 3628.7 + 2562.6 + 2415.6 + 2150.8 = $10,758 Mil.
Gross Profit was 2710.9 + 1542.5 + 1333.4 + 967.7 = $6,555 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 $4,103 Mil.
Total Current Liabilities was $7,650 Mil.
Long-Term Debt was $41,319 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)|
|=||(2490.5 / 15767.1)||/||(4420.1 / 10757.7)|
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)|
|=||(6554.5 / 10757.7)||/||(12160.4 / 15767.1)|
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 - (8755.2 + 1557.2) / 132619.1)||/||(1 - (10486.9 + 2859) / 138411.1)|
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))|
|=||(4607.6 / (4607.6 + 2859))||/||(6568.4 / (6568.4 + 1557.2))|
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)|
|=||(4748.1 / 15767.1)||/||(4102.6 / 10757.7)|
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)|
|=||((37075.1 + 8867.4) / 132619.1)||/||((41319.4 + 7649.5) / 138411.1)|
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|
|=||(4424.3 - 155.1||-||5204.7)||/||132619.1|
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 -2.75 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 PLC Annual Data
Allergan PLC Quarterly Data