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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 3.09. The lowest was -3.52. And the median was -2.45.
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 * 0.9833||+||0.528 * 1.0449||+||0.404 * 1.0317||+||0.892 * 0.9605||+||0.115 * 1.06|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1537||+||4.679 * -0.0379||-||0.327 * 0.9864|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $427 Mil.|
Revenue was 582.354 + 611.088 + 578.209 + 623.285 = $2,395 Mil.
Gross Profit was 266.128 + 281.861 + 266.257 + 253.029 = $1,067 Mil.
Total Current Assets was $1,511 Mil.
Total Assets was $5,856 Mil.
Property, Plant and Equipment(Net PPE) was $446 Mil.
Depreciation, Depletion and Amortization(DDA) was $290 Mil.
Selling, General & Admin. Expense(SGA) was $903 Mil.
Total Current Liabilities was $707 Mil.
Long-Term Debt was $2,913 Mil.
Net Income was 21.82 + -35.034 + -10.08 + -16.055 = $-39 Mil.
Non Operating Income was -15.088 + -14.112 + -2.514 + -2.667 = $-34 Mil.
Cash Flow from Operations was 52.84 + 98.721 + -4.599 + 70.032 = $217 Mil.
|Accounts Receivable was $452 Mil.
Revenue was 603.768 + 623.371 + 612.892 + 653.431 = $2,493 Mil.
Gross Profit was 276.966 + 287.334 + 295.215 + 301.565 = $1,161 Mil.
Total Current Assets was $1,887 Mil.
Total Assets was $6,574 Mil.
Property, Plant and Equipment(Net PPE) was $445 Mil.
Depreciation, Depletion and Amortization(DDA) was $319 Mil.
Selling, General & Admin. Expense(SGA) was $815 Mil.
Total Current Liabilities was $1,126 Mil.
Long-Term Debt was $2,994 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)|
|=||(427.241 / 2394.936)||/||(452.366 / 2493.462)|
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)|
|=||(1161.08 / 2493.462)||/||(1067.275 / 2394.936)|
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 - (1511.206 + 446.313) / 5855.674)||/||(1 - (1886.71 + 445.315) / 6574.165)|
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))|
|=||(318.917 / (318.917 + 445.315))||/||(289.8 / (289.8 + 446.313))|
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)|
|=||(902.84 / 2394.936)||/||(814.764 / 2493.462)|
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)|
|=||((2913.1 + 706.51) / 5855.674)||/||((2993.928 + 1126.015) / 6574.165)|
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|
|=||(-39.349 - -34.381||-||216.994)||/||5855.674|
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 -2.69 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