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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 * 0.9157+0.528 * 0.9903+0.404 * 1.0015+0.892 * 1.1049+0.115 * 0.9777
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9548+4.679 * -0.0346-0.327 * 0.995
=-2.62

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Accounts Receivable was $1,787 Mil.
Revenue was 1300.4 + 1334.9 + 1454.8 + 1371.4 = $5,462 Mil.
Gross Profit was 373.9 + 384.7 + 431 + 449.5 = $1,639 Mil.
Total Current Assets was $3,940 Mil.
Total Assets was $10,713 Mil.
Property, Plant and Equipment(Net PPE) was $218 Mil.
Depreciation, Depletion and Amortization(DDA) was $342 Mil.
Selling, General & Admin. Expense(SGA) was $842 Mil.
Total Current Liabilities was $4,022 Mil.
Long-Term Debt was $2,072 Mil.
Net Income was 46.5 + 62.3 + 133.3 + 139.3 = $381 Mil.
Non Operating Income was 25.8 + 25.8 + 25.6 + 26 = $103 Mil.
Cash Flow from Operations was 109.4 + 326.1 + 244.8 + -31.6 = $649 Mil.
Accounts Receivable was $1,766 Mil.
Revenue was 1231.3 + 1245.4 + 1286.8 + 1179.3 = $4,943 Mil.
Gross Profit was 346.8 + 347.5 + 396 + 378.8 = $1,469 Mil.
Total Current Assets was $3,595 Mil.
Total Assets was $9,731 Mil.
Property, Plant and Equipment(Net PPE) was $191 Mil.
Depreciation, Depletion and Amortization(DDA) was $282 Mil.
Selling, General & Admin. Expense(SGA) was $798 Mil.
Total Current Liabilities was $3,439 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)
=(1787 / 5461.5) / (1766.1 / 4942.8)
=0.32719949 / 0.3573076
=0.9157

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)
=(1469.1 / 4942.8) / (1639.1 / 5461.5)
=0.2972202 / 0.30011901
=0.9903

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 - (3939.5 + 218.2) / 10712.6) / (1 - (3594.8 + 190.6) / 9730.9)
=0.61188694 / 0.61099179
=1.0015

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
=5461.5 / 4942.8
=1.1049

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))
=(282.2 / (282.2 + 190.6)) / (342 / (342 + 218.2))
=0.59686971 / 0.61049625
=0.9777

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)
=(841.7 / 5461.5) / (797.8 / 4942.8)
=0.15411517 / 0.16140649
=0.9548

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)
=((2071.8 + 4022.4) / 10712.6) / ((2125 + 3438.7) / 9730.9)
=0.5688815 / 0.57175595
=0.995

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
=(381.4 - 103.2 - 648.7) / 10712.6
=-0.0346

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 own currency.

Arthur J. Gallagher & Co Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.9850.86620.63870.7821.00311.19580.90390.9320.91841.0079
GMI 0.99111.08080.9650.93212.21851.00661.00171.09221.09891.0123
AQI 1.16171.21941.34921.10780.99520.98021.07631.0591.07580.974
SGI 1.03381.05820.99251.07331.0781.14511.18061.26161.45511.1655
DEPI 0.63710.90720.89580.92440.93380.98810.97671.08420.92450.9155
SGAI 0.9620.9681.09191.01440.30581.03190.97680.90620.95450.9402
LVGI 0.96451.04280.9330.90210.94981.03630.94111.03830.96180.9965
TATA 0.0373-0.0319-0.0358-0.0343-0.0257-0.0401-0.0357-0.0192-0.0188-0.0365
M-score -2.25-2.59-2.87-2.75-1.76-2.38-2.52-2.31-2.14-2.50

Arthur J. Gallagher & Co Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.9320.92351.16621.07680.91840.97510.65720.83771.00790.9157
GMI 1.09221.12771.14411.12021.09891.08481.04251.03581.01230.9903
AQI 1.0590.99791.0541.06191.07581.13641.08621.02720.9741.0015
SGI 1.26161.29191.37561.44171.45511.44511.34411.24151.16551.1049
DEPI 1.08421.0841.08160.96670.92450.89680.85390.89350.91550.9777
SGAI 0.87910.83830.82360.85220.9531.00221.03721.02630.97070.9548
LVGI 1.03831.08911.0191.03550.96180.9330.93970.94380.99650.995
TATA -0.0224-0.0252-0.0292-0.0118-0.0222-0.0296-0.0086-0.0249-0.0365-0.0346
M-score -2.32-2.33-2.00-1.97-2.16-2.13-2.47-2.50-2.50-2.62
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