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Avon Products Inc (NYSE:AVP)
Beneish M-Score
-3.05 (As of Today)

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.

Avon Products Inc has a M-score of -3.05 suggests that the company is not a manipulator.

AVP' s 10-Year Beneish M-Score Range
Min: -3.12   Max: -2.01
Current: -3.05

-3.12
-2.01

During the past 13 years, the highest Beneish M-Score of Avon Products Inc was -2.01. The lowest was -3.12. And the median was -2.50.


Definition

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 * 1.0255+0.528 * 1.0123+0.404 * 1.022+0.892 * 0.8938+0.115 * 1.1646
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0916+4.679 * -0.1078-0.327 * 1.0416
=-3.05

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $634 Mil.
Revenue was 2188.6 + 2183.6 + 2667.2 + 2322.9 = $9,362 Mil.
Gross Profit was 1377.9 + 1228.2 + 1627.2 + 1451.2 = $5,685 Mil.
Total Current Assets was $3,041 Mil.
Total Assets was $6,115 Mil.
Property, Plant and Equipment(Net PPE) was $1,365 Mil.
Depreciation, Depletion and Amortization(DDA) was $322 Mil.
Selling, General & Admin. Expense(SGA) was $5,549 Mil.
Total Current Liabilities was $2,108 Mil.
Long-Term Debt was $2,480 Mil.
Net Income was 19 + -168.3 + -69.1 + -5.5 = $-224 Mil.
Non Operating Income was -2.6 + -66.4 + -14.3 + -9.7 = $-93 Mil.
Cash Flow from Operations was 105.5 + -112.6 + 443.3 + 92.3 = $529 Mil.
Accounts Receivable was $692 Mil.
Revenue was 2508.9 + 2456 + 2999.1 + 2510.6 = $10,475 Mil.
Gross Profit was 1573.5 + 1530.6 + 1794.6 + 1539.4 = $6,438 Mil.
Total Current Assets was $3,463 Mil.
Total Assets was $6,685 Mil.
Property, Plant and Equipment(Net PPE) was $1,394 Mil.
Depreciation, Depletion and Amortization(DDA) was $399 Mil.
Selling, General & Admin. Expense(SGA) was $5,688 Mil.
Total Current Liabilities was $2,180 Mil.
Long-Term Debt was $2,635 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(634 / 9362.3) / (691.7 / 10474.6)
=0.0677184 / 0.06603593
=1.0255

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1228.2 / 10474.6) / (1377.9 / 9362.3)
=0.61463922 / 0.60716918
=1.0123

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (3040.5 + 1365.3) / 6115.2) / (1 - (3462.9 + 1393.9) / 6685.3)
=0.27953297 / 0.27351054
=1.022

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=9362.3 / 10474.6
=0.8938

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))
=(398.7 / (398.7 + 1393.9)) / (322.3 / (322.3 + 1365.3))
=0.22241437 / 0.19098128
=1.1646

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)
=(5549.1 / 9362.3) / (5687.6 / 10474.6)
=0.59270692 / 0.54298971
=1.0916

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)
=((2480 + 2107.5) / 6115.2) / ((2634.8 + 2180.3) / 6685.3)
=0.75017988 / 0.7202519
=1.0416

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-223.9 - -93 - 528.5) / 6115.2
=-0.1078

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 -3.05 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Avon Products Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.95681.00621.03740.9910.80431.16721.01290.88661.04030.9683
GMI 0.99041.00981.01871.00120.9571.00810.99610.99271.03540.9838
AQI 1.08281.10010.92281.05211.19670.8441.60661.01930.96590.9677
SGI 1.13191.05191.06481.14541.07560.97131.04621.03950.94910.9289
DEPI 1.15720.99270.92571.06760.97061.15720.98830.80811.02550.9293
SGAI 0.99931.02511.10940.97950.97991.04381.00331.00841.04571.0285
LVGI 0.86031.14931.02861.09840.96390.93191.00230.99131.04351.0186
TATA -0.002-0.0084-0.0766-0.00920.0271-0.0218-0.0052-0.0138-0.0801-0.065
M-score -2.32-2.48-2.80-2.40-2.40-2.48-2.21-2.63-2.88-2.92

Avon Products Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.93780.71980.83240.84130.83631.25291.17571.19741.15441.0255
GMI 1.01261.0271.03371.03591.01951.00670.9940.98331.01031.0123
AQI 1.00111.01411.01110.96590.92241.02290.93850.96771.11961.022
SGI 1.00871.1971.1641.17361.16860.77310.77360.75120.73730.8938
DEPI 0.98850.68090.78110.58040.57560.75960.59661.15011.17711.1646
SGAI 1.01881.051.05951.05331.02780.97320.9781.02111.04551.0916
LVGI 1.01371.06791.03851.04351.06031.00571.00681.01861.02851.0416
TATA -0.0278-0.0288-0.0524-0.1004-0.0779-0.1177-0.1123-0.0757-0.1153-0.1078
M-score -2.66-2.74-2.76-3.01-2.94-3.01-3.12-2.89-3.05-3.05
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