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Arthur J. Gallagher & Co (NYSE:AJG)
Beneish M-Score
-2.62 (As of Today)

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.

Arthur J. Gallagher & Co has a M-score of -2.62 suggests that the company is not a manipulator.

AJG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.27   Max: 3
Current: -2.62

-3.27
3

During the past 13 years, the highest Beneish M-Score of Arthur J. Gallagher & Co was 3.00. The lowest was -3.27. And the median was -2.46.


Definition

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 Arthur J. Gallagher & Co 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 * 0.9949+0.528 * 1.0067+0.404 * 1.0105+0.892 * 1.0456+0.115 * 0.9773
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9383+4.679 * -0.0393-0.327 * 1.0329
=-2.62

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $1,806 Mil.
Revenue was 1482.3 + 1427.1 + 1300.4 + 1334.9 = $5,545 Mil.
Gross Profit was 406 + 471.1 + 373.9 + 384.7 = $1,636 Mil.
Total Current Assets was $4,214 Mil.
Total Assets was $11,200 Mil.
Property, Plant and Equipment(Net PPE) was $214 Mil.
Depreciation, Depletion and Amortization(DDA) was $355 Mil.
Selling, General & Admin. Expense(SGA) was $821 Mil.
Total Current Liabilities was $4,399 Mil.
Long-Term Debt was $2,045 Mil.
Net Income was 122.8 + 150 + 46.5 + 62.3 = $382 Mil.
Non Operating Income was 28.5 + 27.2 + 25.8 + 25.8 = $107 Mil.
Cash Flow from Operations was 243.4 + 35.6 + 109.4 + 326.1 = $715 Mil.
Accounts Receivable was $1,736 Mil.
Revenue was 1454.8 + 1371.4 + 1231.3 + 1245.4 = $5,303 Mil.
Gross Profit was 431 + 449.5 + 346.8 + 347.5 = $1,575 Mil.
Total Current Assets was $4,020 Mil.
Total Assets was $10,510 Mil.
Property, Plant and Equipment(Net PPE) was $201 Mil.
Depreciation, Depletion and Amortization(DDA) was $314 Mil.
Selling, General & Admin. Expense(SGA) was $837 Mil.
Total Current Liabilities was $3,729 Mil.
Long-Term Debt was $2,125 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1805.7 / 5544.7) / (1735.8 / 5302.9)
=0.32566234 / 0.32733033
=0.9949

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1574.8 / 5302.9) / (1635.7 / 5544.7)
=0.29696958 / 0.29500243
=1.0067

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (4213.7 + 213.9) / 11200.3) / (1 - (4020.1 + 200.7) / 10510.4)
=0.60468916 / 0.59841681
=1.0105

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=5544.7 / 5302.9
=1.0456

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))
=(314 / (314 + 200.7)) / (355.3 / (355.3 + 213.9))
=0.61006412 / 0.62420942
=0.9773

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)
=(820.7 / 5544.7) / (836.5 / 5302.9)
=0.14801522 / 0.15774388
=0.9383

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)
=((2044.6 + 4398.9) / 11200.3) / ((2125 + 3729.2) / 10510.4)
=0.57529709 / 0.55699117
=1.0329

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(381.6 - 107.3 - 714.5) / 11200.3
=-0.0393

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.

Arthur J. Gallagher & Co has a M-score of -2.62 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Arthur J. Gallagher & Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.98970.83010.62560.79841.00311.19580.90390.9320.91840.8638
GMI 0.93290.98090.95122.01111.04311.00661.00171.09221.09891.0123
AQI 1.16171.21941.34921.10780.99520.98021.07631.0591.07580.9925
SGI 1.02881.10421.01341.05121.0781.14511.18061.26161.45511.1655
DEPI 0.63190.86940.93980.88110.93380.98810.97671.08420.92450.9155
SGAI 1.08610.98431.08020.31580.99291.03190.97680.87910.9530.9707
LVGI 0.96451.04280.9330.90210.94981.03630.94111.03830.96180.9956
TATA 0.007-0.0319-0.0342-0.0343-0.025-0.0403-0.0357-0.0224-0.0222-0.0366
M-score -2.45-2.64-2.86-2.07-2.49-2.38-2.52-2.32-2.16-2.63

Arthur J. Gallagher & Co Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.16621.07680.91840.97510.65720.83770.86380.91571.07520.9949
GMI 1.14411.12021.09891.08481.04251.03581.01230.99030.99621.0067
AQI 1.0541.06191.07581.13641.08621.02720.99251.00151.00571.0105
SGI 1.37561.44171.45511.44511.34411.24151.16551.10491.07451.0456
DEPI 1.08160.96670.92450.89680.85390.89350.91550.97770.97840.9773
SGAI 0.82360.85220.9531.00221.03721.02630.97070.95480.94590.9383
LVGI 1.0191.03550.96180.9330.93970.94380.99560.9951.05021.0329
TATA -0.0292-0.0118-0.0222-0.0296-0.0093-0.0249-0.0366-0.0346-0.037-0.0393
M-score -2.00-1.97-2.16-2.13-2.48-2.50-2.63-2.62-2.53-2.62
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