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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 Alere Inc was 3.11. The lowest was -3.52. And the median was -2.44.
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 Alere Inc 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 * 0.9241||+||0.528 * 1.0361||+||0.404 * 0.9729||+||0.892 * 0.9843||+||0.115 * 1.0548|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0017||+||4.679 * -0.0674||-||0.327 * 1.0301|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $517 Mil.|
Revenue was 736.246 + 737.943 + 716.622 + 774.109 = $2,965 Mil.
Gross Profit was 342.859 + 339.918 + 351.239 + 383.252 = $1,417 Mil.
Total Current Assets was $1,527 Mil.
Total Assets was $6,809 Mil.
Property, Plant and Equipment(Net PPE) was $527 Mil.
Depreciation, Depletion and Amortization(DDA) was $405 Mil.
Selling, General & Admin. Expense(SGA) was $1,182 Mil.
Total Current Liabilities was $717 Mil.
Long-Term Debt was $3,696 Mil.
Net Income was -86.149 + -49.655 + -6.221 + -3.687 = $-146 Mil.
Non Operating Income was 0 + 0 + 0 + 10.862 = $11 Mil.
Cash Flow from Operations was 91.728 + 19.259 + 105.908 + 85.672 = $303 Mil.
|Accounts Receivable was $569 Mil.
Revenue was 753.32 + 763.985 + 739.249 + 755.763 = $3,012 Mil.
Gross Profit was 369.317 + 384.487 + 364.257 + 373.868 = $1,492 Mil.
Total Current Assets was $1,475 Mil.
Total Assets was $7,155 Mil.
Property, Plant and Equipment(Net PPE) was $544 Mil.
Depreciation, Depletion and Amortization(DDA) was $460 Mil.
Selling, General & Admin. Expense(SGA) was $1,199 Mil.
Total Current Liabilities was $696 Mil.
Long-Term Debt was $3,805 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)|
|=||(517.434 / 2964.92)||/||(568.873 / 3012.317)|
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)|
|=||(339.918 / 3012.317)||/||(342.859 / 2964.92)|
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 - (1527.159 + 526.922) / 6808.621)||/||(1 - (1474.817 + 544.271) / 7154.619)|
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))|
|=||(460.108 / (460.108 + 544.271))||/||(404.554 / (404.554 + 526.922))|
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)|
|=||(1182.264 / 2964.92)||/||(1199.135 / 3012.317)|
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)|
|=||((3696.438 + 716.886) / 6808.621)||/||((3805.458 + 696.478) / 7154.619)|
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|
|=||(-145.712 - 10.862||-||302.567)||/||6808.621|
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.
Alere Inc has a M-score of -2.87 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
Alere Inc Annual Data
Alere Inc Quarterly Data