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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 -2.38.
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 * 1.0558||+||0.528 * 1.0128||+||0.404 * 3.1597||+||0.892 * 1.1658||+||0.115 * 0.554|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1741||+||4.679 * -0.0405||-||0.327 * 1.836|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $533 Mil.|
Revenue was 700.867 + 666.637 + 636.21 + 600.333 = $2,604 Mil.
Gross Profit was 643.241 + 612.58 + 584.203 + 530.934 = $2,371 Mil.
Total Current Assets was $2,425 Mil.
Total Assets was $13,133 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 $718 Mil.
Long-Term Debt was $3,433 Mil.
Net Income was 66.604 + -183.757 + 170.215 + 91.323 = $144 Mil.
Non Operating Income was -1.059 + 2.795 + -2.045 + 1.005 = $1 Mil.
Cash Flow from Operations was 190.857 + 223.086 + 238.222 + 23.034 = $675 Mil.
|Accounts Receivable was $433 Mil.
Revenue was 599.476 + 555.146 + 512.495 + 566.616 = $2,234 Mil.
Gross Profit was 550.037 + 503.288 + 472.869 + 533.677 = $2,060 Mil.
Total Current Assets was $2,796 Mil.
Total Assets was $4,202 Mil.
Property, Plant and Equipment(Net PPE) was $392 Mil.
Depreciation, Depletion and Amortization(DDA) was $47 Mil.
Selling, General & Admin. Expense(SGA) was $630 Mil.
Total Current Liabilities was $607 Mil.
Long-Term Debt was $117 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)|
|=||(532.832 / 2604.047)||/||(432.888 / 2233.733)|
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)|
|=||(612.58 / 2233.733)||/||(643.241 / 2604.047)|
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 - (2425.349 + 697.025) / 13133.23)||/||(1 - (2796.029 + 392.248) / 4201.962)|
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))|
|=||(46.939 / (46.939 + 392.248))||/||(166.621 / (166.621 + 697.025))|
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)|
|=||(862.595 / 2604.047)||/||(630.209 / 2233.733)|
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)|
|=||((3432.557 + 718.25) / 13133.23)||/||((116.599 + 606.74) / 4201.962)|
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|
|=||(144.385 - 0.696||-||675.199)||/||13133.23|
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 -1.95 signals that the company is likely to 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