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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 Avery Dennison Corp was -2.21. The lowest was -3.79. And the median was -2.56.
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 Avery Dennison Corp 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 * 0.9142||+||0.528 * 0.9869||+||0.404 * 1.0084||+||0.892 * 0.9926||+||0.115 * 0.9585|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9715||+||4.679 * -0.0461||-||0.327 * 1.0408|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,011 Mil.|
Revenue was 1516 + 1528 + 1604.8 + 1559.6 = $6,208 Mil.
Gross Profit was 417.6 + 430 + 415.1 + 400.7 = $1,663 Mil.
Total Current Assets was $1,998 Mil.
Total Assets was $4,354 Mil.
Property, Plant and Equipment(Net PPE) was $852 Mil.
Depreciation, Depletion and Amortization(DDA) was $199 Mil.
Selling, General & Admin. Expense(SGA) was $1,136 Mil.
Total Current Liabilities was $1,551 Mil.
Long-Term Debt was $970 Mil.
Net Income was 63.3 + 71.6 + 70.9 + 64.3 = $270 Mil.
Non Operating Income was -27.7 + -14.3 + -14.6 + -7.8 = $-64 Mil.
Cash Flow from Operations was 162.6 + 8.3 + 174 + 190.4 = $535 Mil.
|Accounts Receivable was $1,115 Mil.
Revenue was 1615.8 + 1550.1 + 1583.9 + 1504.9 = $6,255 Mil.
Gross Profit was 428.2 + 407.2 + 416.3 + 402.2 = $1,654 Mil.
Total Current Assets was $2,130 Mil.
Total Assets was $4,617 Mil.
Property, Plant and Equipment(Net PPE) was $905 Mil.
Depreciation, Depletion and Amortization(DDA) was $201 Mil.
Selling, General & Admin. Expense(SGA) was $1,178 Mil.
Total Current Liabilities was $1,623 Mil.
Long-Term Debt was $945 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)|
|=||(1011.4 / 6208.4)||/||(1114.6 / 6254.7)|
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)|
|=||(430 / 6254.7)||/||(417.6 / 6208.4)|
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 - (1998.1 + 851.7) / 4353.6)||/||(1 - (2129.9 + 905.3) / 4616.6)|
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))|
|=||(200.7 / (200.7 + 905.3))||/||(198.9 / (198.9 + 851.7))|
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)|
|=||(1136.3 / 6208.4)||/||(1178.3 / 6254.7)|
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)|
|=||((969.5 + 1550.8) / 4353.6)||/||((945.2 + 1622.7) / 4616.6)|
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|
|=||(270.1 - -64.4||-||535.3)||/||4353.6|
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.
Avery Dennison Corp has a M-score of -2.80 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
Avery Dennison Corp Annual Data
Avery Dennison Corp Quarterly Data