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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 -4.55. And the median was -2.51.
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 * 0.9594||+||0.528 * 0.9967||+||0.404 * 0.418||+||0.892 * 0.8309||+||0.115 * 0.8884|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9876||+||4.679 * -0.3242||-||0.327 * 1.3679|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $470 Mil.|
Revenue was 1666.9 + 1823.4 + 1794.2 + 2341 = $7,626 Mil.
Gross Profit was 1014.2 + 1110 + 1086.9 + 1421.7 = $4,633 Mil.
Total Current Assets was $2,386 Mil.
Total Assets was $3,775 Mil.
Property, Plant and Equipment(Net PPE) was $948 Mil.
Depreciation, Depletion and Amortization(DDA) was $163 Mil.
Selling, General & Admin. Expense(SGA) was $4,386 Mil.
Total Current Liabilities was $1,726 Mil.
Long-Term Debt was $2,196 Mil.
Net Income was -697 + 28.8 + -147.3 + -330.7 = $-1,146 Mil.
Non Operating Income was 11.3 + -0.8 + -19.4 + -50.8 = $-60 Mil.
Cash Flow from Operations was 13.2 + 88.2 + -198.1 + 234 = $137 Mil.
|Accounts Receivable was $590 Mil.
Revenue was 2138.2 + 2188.6 + 2183.6 + 2667.2 = $9,178 Mil.
Gross Profit was 1324.3 + 1377.9 + 1228.2 + 1627.2 = $5,558 Mil.
Total Current Assets was $3,089 Mil.
Total Assets was $6,090 Mil.
Property, Plant and Equipment(Net PPE) was $1,300 Mil.
Depreciation, Depletion and Amortization(DDA) was $195 Mil.
Selling, General & Admin. Expense(SGA) was $5,345 Mil.
Total Current Liabilities was $2,153 Mil.
Long-Term Debt was $2,473 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)|
|=||(470.3 / 7625.5)||/||(590 / 9177.6)|
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)|
|=||(1110 / 9177.6)||/||(1014.2 / 7625.5)|
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 - (2385.6 + 948.3) / 3774.7)||/||(1 - (3089.4 + 1299.7) / 6090.4)|
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))|
|=||(194.5 / (194.5 + 1299.7))||/||(162.8 / (162.8 + 948.3))|
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)|
|=||(4385.7 / 7625.5)||/||(5344.6 / 9177.6)|
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)|
|=||((2196.3 + 1725.5) / 3774.7)||/||((2472.8 + 2153.1) / 6090.4)|
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|
|=||(-1146.2 - -59.7||-||137.3)||/||3774.7|
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 -4.55 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