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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 2.87. The lowest was -5.60. 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 * 0.9686||+||0.528 * 0.9998||+||0.404 * 0.9988||+||0.892 * 1.0339||+||0.115 * 0.9934|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0054||+||4.679 * -0.0625||-||0.327 * 1.0601|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $720 Mil.|
Revenue was 1374.569 + 1349.71 + 1301.723 + 1331.82 = $5,358 Mil.
Gross Profit was 773.396 + 752.544 + 718.721 + 742.887 = $2,988 Mil.
Total Current Assets was $1,416 Mil.
Total Assets was $6,164 Mil.
Property, Plant and Equipment(Net PPE) was $3,074 Mil.
Depreciation, Depletion and Amortization(DDA) was $342 Mil.
Selling, General & Admin. Expense(SGA) was $2,013 Mil.
Total Current Liabilities was $1,356 Mil.
Long-Term Debt was $1,956 Mil.
Net Income was 98.034 + 88.235 + 87.723 + 93.199 = $367 Mil.
Non Operating Income was 0.112 + 1.425 + 3.363 + -0.238 = $5 Mil.
Cash Flow from Operations was 147.918 + 223.743 + 203.353 + 172.766 = $748 Mil.
|Accounts Receivable was $719 Mil.
Revenue was 1357.755 + 1313.587 + 1267.83 + 1242.846 = $5,182 Mil.
Gross Profit was 757.221 + 730.181 + 696.481 + 705.176 = $2,889 Mil.
Total Current Assets was $1,428 Mil.
Total Assets was $5,905 Mil.
Property, Plant and Equipment(Net PPE) was $2,871 Mil.
Depreciation, Depletion and Amortization(DDA) was $317 Mil.
Selling, General & Admin. Expense(SGA) was $1,936 Mil.
Total Current Liabilities was $987 Mil.
Long-Term Debt was $2,007 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)|
|=||(720.21 / 5357.822)||/||(719.149 / 5182.018)|
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)|
|=||(752.544 / 5182.018)||/||(773.396 / 5357.822)|
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 - (1415.699 + 3074.251) / 6163.938)||/||(1 - (1428.026 + 2871.224) / 5904.774)|
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))|
|=||(316.765 / (316.765 + 2871.224))||/||(341.668 / (341.668 + 3074.251))|
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)|
|=||(2012.741 / 5357.822)||/||(1936.281 / 5182.018)|
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)|
|=||((1956.366 + 1356.191) / 6163.938)||/||((2006.943 + 986.523) / 5904.774)|
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|
|=||(367.191 - 4.662||-||747.78)||/||6163.938|
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 -2.79 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