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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 Airgas Inc was -0.93. The lowest was -3.57. And the median was -2.70.
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 Airgas 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 * 0.9408||+||0.528 * 0.9807||+||0.404 * 1.0065||+||0.892 * 1.0017||+||0.115 * 0.979|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0307||+||4.679 * -0.0677||-||0.327 * 1.0498|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $667 Mil.|
Revenue was 1294.084 + 1295.414 + 1374.569 + 1349.71 = $5,314 Mil.
Gross Profit was 744.407 + 741.832 + 773.396 + 752.544 = $3,012 Mil.
Total Current Assets was $1,384 Mil.
Total Assets was $6,135 Mil.
Property, Plant and Equipment(Net PPE) was $3,091 Mil.
Depreciation, Depletion and Amortization(DDA) was $353 Mil.
Selling, General & Admin. Expense(SGA) was $2,043 Mil.
Total Current Liabilities was $1,148 Mil.
Long-Term Debt was $1,955 Mil.
Net Income was 77.367 + 73.864 + 98.034 + 88.235 = $338 Mil.
Non Operating Income was 3.224 + 4.316 + 0.112 + 1.425 = $9 Mil.
Cash Flow from Operations was 231.411 + 140.863 + 147.918 + 223.743 = $744 Mil.
|Accounts Receivable was $708 Mil.
Revenue was 1301.723 + 1331.82 + 1357.755 + 1313.587 = $5,305 Mil.
Gross Profit was 718.721 + 742.887 + 757.221 + 730.181 = $2,949 Mil.
Total Current Assets was $1,416 Mil.
Total Assets was $5,974 Mil.
Property, Plant and Equipment(Net PPE) was $2,952 Mil.
Depreciation, Depletion and Amortization(DDA) was $329 Mil.
Selling, General & Admin. Expense(SGA) was $1,979 Mil.
Total Current Liabilities was $1,129 Mil.
Long-Term Debt was $1,749 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)|
|=||(667.399 / 5313.777)||/||(708.227 / 5304.885)|
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)|
|=||(2949.01 / 5304.885)||/||(3012.179 / 5313.777)|
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 - (1384.198 + 3090.543) / 6134.956)||/||(1 - (1415.684 + 2951.766) / 5973.61)|
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))|
|=||(329.058 / (329.058 + 2951.766))||/||(352.747 / (352.747 + 3090.543))|
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)|
|=||(2042.754 / 5313.777)||/||(1978.674 / 5304.885)|
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)|
|=||((1954.82 + 1147.834) / 6134.956)||/||((1748.662 + 1129.047) / 5973.61)|
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|
|=||(337.5 - 9.077||-||743.935)||/||6134.956|
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.
Airgas Inc has a M-score of -2.88 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
Airgas Inc Annual Data
Airgas Inc Quarterly Data