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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 -0.87. The lowest was -3.95. And the median was -2.66.
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 * 1.0016||+||0.528 * 1.0009||+||0.404 * 0.9762||+||0.892 * 1.0401||+||0.115 * 0.9828|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0021||+||4.679 * -0.0566||-||0.327 * 0.9356|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $693 Mil.|
Revenue was 1331.82 + 1357.755 + 1313.587 + 1267.83 = $5,271 Mil.
Gross Profit was 742.887 + 757.221 + 730.181 + 696.481 = $2,927 Mil.
Total Current Assets was $1,474 Mil.
Total Assets was $5,990 Mil.
Property, Plant and Equipment(Net PPE) was $2,906 Mil.
Depreciation, Depletion and Amortization(DDA) was $323 Mil.
Selling, General & Admin. Expense(SGA) was $1,960 Mil.
Total Current Liabilities was $1,220 Mil.
Long-Term Debt was $1,758 Mil.
Net Income was 93.199 + 98.312 + 88.852 + 88.357 = $369 Mil.
Non Operating Income was -0.238 + 0.081 + 1.869 + 0.34 = $2 Mil.
Cash Flow from Operations was 172.766 + 144.946 + 196.972 + 190.998 = $706 Mil.
|Accounts Receivable was $665 Mil.
Revenue was 1242.846 + 1281.97 + 1279.891 + 1262.923 = $5,068 Mil.
Gross Profit was 705.176 + 718.958 + 704.348 + 687.803 = $2,816 Mil.
Total Current Assets was $1,402 Mil.
Total Assets was $5,755 Mil.
Property, Plant and Equipment(Net PPE) was $2,769 Mil.
Depreciation, Depletion and Amortization(DDA) was $302 Mil.
Selling, General & Admin. Expense(SGA) was $1,880 Mil.
Total Current Liabilities was $1,353 Mil.
Long-Term Debt was $1,705 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)|
|=||(692.748 / 5270.992)||/||(664.966 / 5067.63)|
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)|
|=||(757.221 / 5067.63)||/||(742.887 / 5270.992)|
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 - (1474.474 + 2906.363) / 5989.981)||/||(1 - (1402.373 + 2769.12) / 5755.259)|
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))|
|=||(301.693 / (301.693 + 2769.12))||/||(322.787 / (322.787 + 2906.363))|
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)|
|=||(1960.003 / 5270.992)||/||(1880.365 / 5067.63)|
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)|
|=||((1757.978 + 1219.611) / 5989.981)||/||((1704.744 + 1353.093) / 5755.259)|
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|
|=||(368.72 - 2.052||-||705.682)||/||5989.981|
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 -2.70 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