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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 * 0.9952||+||0.528 * 0.9938||+||0.404 * 1.0453||+||0.892 * 1.0297||+||0.115 * 0.9902|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0073||+||4.679 * -0.058||-||0.327 * 0.9503|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|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.
Net Income was 98.312 + 88.852 + 88.357 + 82.759 = $358 Mil.
Non Operating Income was 0.081 + 1.869 + 0.34 + -6.858 = $-5 Mil.
Cash Flow from Operations was 144.946 + 196.972 + 190.998 + 172.668 = $706 Mil.
|Accounts Receivable was $702 Mil.
Revenue was 1281.97 + 1279.891 + 1262.923 + 1207.708 = $5,032 Mil.
Gross Profit was 718.958 + 704.348 + 687.803 + 677.143 = $2,788 Mil.
Total Current Assets was $1,445 Mil.
Total Assets was $5,626 Mil.
Property, Plant and Equipment(Net PPE) was $2,718 Mil.
Depreciation, Depletion and Amortization(DDA) was $297 Mil.
Selling, General & Admin. Expense(SGA) was $1,867 Mil.
Total Current Liabilities was $1,425 Mil.
Long-Term Debt was $1,577 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)|
|=||(719.149 / 5182.018)||/||(701.77 / 5032.492)|
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)|
|=||(730.181 / 5032.492)||/||(757.221 / 5182.018)|
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 - (1428.026 + 2871.224) / 5904.774)||/||(1 - (1445.337 + 2717.554) / 5626.449)|
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))|
|=||(296.541 / (296.541 + 2717.554))||/||(316.765 / (316.765 + 2871.224))|
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)|
|=||(1936.281 / 5182.018)||/||(1866.853 / 5032.492)|
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)|
|=||((2006.943 + 986.523) / 5904.774)||/||((1576.604 + 1424.897) / 5626.449)|
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|
|=||(358.28 - -4.568||-||705.584)||/||5904.774|
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