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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 -2.01. The lowest was -3.20. And the median was -2.49.
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 * 0.9371||+||0.528 * 1.0271||+||0.404 * 0.9271||+||0.892 * 0.8891||+||0.115 * 1.0261|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9748||+||4.679 * -0.1108||-||0.327 * 1.1162|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $564 Mil.|
Revenue was 2341 + 2138.2 + 2188.6 + 2183.6 = $8,851 Mil.
Gross Profit was 1421.7 + 1324.3 + 1377.9 + 1228.2 = $5,352 Mil.
Total Current Assets was $2,965 Mil.
Total Assets was $5,497 Mil.
Property, Plant and Equipment(Net PPE) was $1,231 Mil.
Depreciation, Depletion and Amortization(DDA) was $193 Mil.
Selling, General & Admin. Expense(SGA) was $4,952 Mil.
Total Current Liabilities was $2,047 Mil.
Long-Term Debt was $2,464 Mil.
Net Income was -330.7 + 91.4 + 19 + -168.3 = $-389 Mil.
Non Operating Income was -50.8 + -19.8 + -2.6 + -66.4 = $-140 Mil.
Cash Flow from Operations was 234 + 132.9 + 105.5 + -112.6 = $360 Mil.
|Accounts Receivable was $676 Mil.
Revenue was 2667.2 + 2322.9 + 2508.9 + 2456 = $9,955 Mil.
Gross Profit was 1627.2 + 1451.2 + 1573.5 + 1530.6 = $6,183 Mil.
Total Current Assets was $3,441 Mil.
Total Assets was $6,492 Mil.
Property, Plant and Equipment(Net PPE) was $1,393 Mil.
Depreciation, Depletion and Amortization(DDA) was $225 Mil.
Selling, General & Admin. Expense(SGA) was $5,713 Mil.
Total Current Liabilities was $2,241 Mil.
Long-Term Debt was $2,533 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)|
|=||(563.5 / 8851.4)||/||(676.3 / 9955)|
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)|
|=||(1324.3 / 9955)||/||(1421.7 / 8851.4)|
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 - (2964.5 + 1231) / 5496.8)||/||(1 - (3441.2 + 1393.3) / 6492.3)|
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))|
|=||(224.6 / (224.6 + 1393.3))||/||(192.6 / (192.6 + 1231))|
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)|
|=||(4952 / 8851.4)||/||(5713.2 / 9955)|
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)|
|=||((2463.9 + 2047.2) / 5496.8)||/||((2532.7 + 2240.5) / 6492.3)|
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|
|=||(-388.6 - -139.6||-||359.8)||/||5496.8|
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 -3.20 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