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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 Alexion Pharmaceuticals Inc was 38.17. The lowest was -4.63. And the median was -2.43.
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 Alexion Pharmaceuticals 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 * 1.0297||+||0.528 * 0.9936||+||0.404 * 0.9541||+||0.892 * 1.1843||+||0.115 * 0.699|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9334||+||4.679 * -0.0516||-||0.327 * 0.9474|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $650 Mil.|
Revenue was 830.74 + 799.106 + 753.116 + 701.038 = $3,084 Mil.
Gross Profit was 763.448 + 728.011 + 692.489 + 642.052 = $2,826 Mil.
Total Current Assets was $2,578 Mil.
Total Assets was $13,253 Mil.
Property, Plant and Equipment(Net PPE) was $1,036 Mil.
Depreciation, Depletion and Amortization(DDA) was $396 Mil.
Selling, General & Admin. Expense(SGA) was $954 Mil.
Total Current Liabilities was $823 Mil.
Long-Term Debt was $3,121 Mil.
Net Income was 92.436 + 94.338 + 114.943 + 92.166 = $394 Mil.
Non Operating Income was -9.309 + 3.615 + -2.82 + 0.091 = $-8 Mil.
Cash Flow from Operations was 382.696 + 291.387 + 243.933 + 167.984 = $1,086 Mil.
|Accounts Receivable was $533 Mil.
Revenue was 700.82 + 666.637 + 636.21 + 600.333 = $2,604 Mil.
Gross Profit was 643.283 + 612.58 + 584.203 + 530.934 = $2,371 Mil.
Total Current Assets was $2,416 Mil.
Total Assets was $13,097 Mil.
Property, Plant and Equipment(Net PPE) was $697 Mil.
Depreciation, Depletion and Amortization(DDA) was $167 Mil.
Selling, General & Admin. Expense(SGA) was $863 Mil.
Total Current Liabilities was $709 Mil.
Long-Term Debt was $3,405 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)|
|=||(650 / 3084)||/||(533 / 2604)|
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)|
|=||(2371 / 2604)||/||(2826 / 3084)|
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 - (2578 + 1036) / 13253)||/||(1 - (2416 + 697) / 13097)|
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))|
|=||(167 / (167 + 697))||/||(396 / (396 + 1036))|
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)|
|=||(954 / 3084)||/||(863 / 2604)|
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)|
|=||((3121 + 823) / 13253)||/||((3405 + 709) / 13097)|
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|
|=||(393.883 - -8.423||-||1086)||/||13253|
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.
Alexion Pharmaceuticals Inc has a M-score of -2.56 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
Alexion Pharmaceuticals Inc Annual Data
Alexion Pharmaceuticals Inc Quarterly Data