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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 * 0.432||+||0.528 * 0.8079||+||0.404 * 1.0249||+||0.892 * 2.2255||+||0.115 * 0.7486|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.965||+||4.679 * 0.0023||-||0.327 * 0.933|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $2,143 Mil.|
Revenue was 4088.9 + 5755 + 4234.2 + 8739 = $22,817 Mil.
Gross Profit was 2846 + 3624.9 + 2520.8 + 4806.6 = $13,798 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 $6,016 Mil.
Total Current Liabilities was $8,133 Mil.
Long-Term Debt was $40,648 Mil.
Net Income was 5301.2 + -243.1 + -512 + -732.9 = $3,813 Mil.
Non Operating Income was 0.2 + -48.7 + -198 + -56.8 = $-303 Mil.
Cash Flow from Operations was 1048.2 + 1401.3 + 525 + 811.6 = $3,786 Mil.
|Accounts Receivable was $2,229 Mil.
Revenue was 2150.8 + 2667.2 + 2655.1 + 2779.3 = $10,252 Mil.
Gross Profit was 967.7 + 1370.7 + 1362.1 + 1308.7 = $5,009 Mil.
Total Current Assets was $6,252 Mil.
Total Assets was $53,467 Mil.
Property, Plant and Equipment(Net PPE) was $1,704 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,333 Mil.
Selling, General & Admin. Expense(SGA) was $2,801 Mil.
Total Current Liabilities was $4,481 Mil.
Long-Term Debt was $15,094 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)|
|=||(2143.2 / 22817.1)||/||(2229.3 / 10252.4)|
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)|
|=||(3624.9 / 10252.4)||/||(2846 / 22817.1)|
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 - (16658.7 + 1569.9) / 142816.3)||/||(1 - (6252.3 + 1704.3) / 53467.4)|
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))|
|=||(2333.1 / (2333.1 + 1704.3))||/||(5314.7 / (5314.7 + 1569.9))|
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)|
|=||(6016.4 / 22817.1)||/||(2801.3 / 10252.4)|
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)|
|=||((40648.1 + 8133) / 142816.3)||/||((15093.8 + 4481.3) / 53467.4)|
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|
|=||(3813.2 - -303.3||-||3786.1)||/||142816.3|
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 -1.99 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