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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.
Avon Products Inc has a M-score of -3.00 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Avon Products Inc was -1.99. The lowest was -3.08. And the median was -2.47.
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 * 1.0294||+||0.528 * 1.0116||+||0.404 * 1.022||+||0.892 * 0.8904||+||0.115 * 1.1011|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0909||+||4.679 * -0.0965||-||0.327 * 1.0416|
|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 $203 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 + 23.1 = $459 Mil.
|Accounts Receivable was $692 Mil.
Revenue was 2508.9 + 2456 + 2999.1 + 2550.9 = $10,515 Mil.
Gross Profit was 1573.5 + 1530.6 + 1794.6 + 1559.9 = $6,459 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 $231 Mil.
Selling, General & Admin. Expense(SGA) was $5,713 Mil.
Total Current Liabilities was $2,180 Mil.
Long-Term Debt was $2,635 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)|
|=||(634 / 9362.3)||/||(691.7 / 10514.9)|
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)|
|=||(1228.2 / 10514.9)||/||(1377.9 / 9362.3)|
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 - (3040.5 + 1365.3) / 6115.2)||/||(1 - (3462.9 + 1393.9) / 6685.3)|
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))|
|=||(231.1 / (231.1 + 1393.9))||/||(202.5 / (202.5 + 1365.3))|
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)|
|=||(5549.1 / 9362.3)||/||(5712.8 / 10514.9)|
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)|
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|
|=||(-223.9 - -93||-||459.3)||/||6115.2|
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 -3.00 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