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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 -5.05. And the median was -2.40.
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 * 0.7423||+||0.528 * 0.971||+||0.404 * 0.8225||+||0.892 * 1.4519||+||0.115 * 1.28|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8563||+||4.679 * -0.0201||-||0.327 * 0.9882|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $436 Mil.|
Revenue was 555.146 + 512.495 + 566.616 + 441.909 = $2,076 Mil.
Gross Profit was 503.288 + 472.869 + 533.677 + 390.357 = $1,900 Mil.
Total Current Assets was $2,560 Mil.
Total Assets was $3,891 Mil.
Property, Plant and Equipment(Net PPE) was $328 Mil.
Depreciation, Depletion and Amortization(DDA) was $37 Mil.
Selling, General & Admin. Expense(SGA) was $581 Mil.
Total Current Liabilities was $503 Mil.
Long-Term Debt was $109 Mil.
Net Income was 177.731 + 166.495 + 159.354 + -18.992 = $485 Mil.
Non Operating Income was -2.045 + -1.202 + 1.258 + -0.841 = $-3 Mil.
Cash Flow from Operations was 281.521 + 106.15 + -31.055 + 208.881 = $565 Mil.
|Accounts Receivable was $405 Mil.
Revenue was 400.405 + 370.091 + 338.941 + 320.526 = $1,430 Mil.
Gross Profit was 349.047 + 330.714 + 303.672 + 287.379 = $1,271 Mil.
Total Current Assets was $1,916 Mil.
Total Assets was $3,050 Mil.
Property, Plant and Equipment(Net PPE) was $179 Mil.
Depreciation, Depletion and Amortization(DDA) was $27 Mil.
Selling, General & Admin. Expense(SGA) was $468 Mil.
Total Current Liabilities was $395 Mil.
Long-Term Debt was $89 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)|
|=||(436.467 / 2076.166)||/||(404.956 / 1429.963)|
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)|
|=||(472.869 / 1429.963)||/||(503.288 / 2076.166)|
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 - (2559.878 + 328.476) / 3890.887)||/||(1 - (1915.502 + 178.842) / 3049.795)|
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))|
|=||(26.513 / (26.513 + 178.842))||/||(36.849 / (36.849 + 328.476))|
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)|
|=||(581.252 / 2076.166)||/||(467.525 / 1429.963)|
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)|
|=||((108.53 + 502.537) / 3890.887)||/||((89.251 + 395.456) / 3049.795)|
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|
|=||(484.588 - -2.83||-||565.497)||/||3890.887|
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 -2.43 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