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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 Avon Products Inc was -1.99. The lowest was -4.46. And the median was -2.54.
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 Avon Products 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 * 1.0771||+||0.528 * 1.0228||+||0.404 * 0.8818||+||0.892 * 0.8265||+||0.115 * 0.8788|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0271||+||4.679 * -0.2982||-||0.327 * 1.1605|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $466 Mil.|
Revenue was 1434.3 + 1306.5 + 876 + 1666.9 = $5,284 Mil.
Gross Profit was 869.3 + 787.7 + 504 + 1014.2 = $3,175 Mil.
Total Current Assets was $2,194 Mil.
Total Assets was $3,638 Mil.
Property, Plant and Equipment(Net PPE) was $743 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $2,955 Mil.
Total Current Liabilities was $1,492 Mil.
Long-Term Debt was $2,140 Mil.
Net Income was 33 + -165.9 + -333.4 + -697 = $-1,163 Mil.
Non Operating Income was 4.7 + -137.2 + -25.4 + 11.3 = $-147 Mil.
Cash Flow from Operations was 61.1 + -191.3 + 188.1 + 10.2 = $68 Mil.
|Accounts Receivable was $524 Mil.
Revenue was 1564.9 + 1552.1 + 1137.6 + 2138.2 = $6,393 Mil.
Gross Profit was 953.9 + 940.4 + 710.7 + 1324.3 = $3,929 Mil.
Total Current Assets was $2,863 Mil.
Total Assets was $4,989 Mil.
Property, Plant and Equipment(Net PPE) was $1,036 Mil.
Depreciation, Depletion and Amortization(DDA) was $139 Mil.
Selling, General & Admin. Expense(SGA) was $3,481 Mil.
Total Current Liabilities was $2,088 Mil.
Long-Term Debt was $2,204 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)|
|=||(466.2 / 5283.7)||/||(523.7 / 6392.8)|
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)|
|=||(3929.3 / 6392.8)||/||(3175.2 / 5283.7)|
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 - (2194.2 + 743.3) / 3638.1)||/||(1 - (2862.7 + 1036.4) / 4988.6)|
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))|
|=||(138.8 / (138.8 + 1036.4))||/||(115.4 / (115.4 + 743.3))|
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)|
|=||(2954.6 / 5283.7)||/||(3480.5 / 6392.8)|
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)|
|=||((2139.6 + 1492.1) / 3638.1)||/||((2203.6 + 2087.5) / 4988.6)|
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|
|=||(-1163.3 - -146.6||-||68.1)||/||3638.1|
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.
Avon Products Inc has a M-score of -4.07 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
Avon Products Inc Annual Data
Avon Products Inc Quarterly Data