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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.
Avery Dennison Corp has a M-score of -2.35 suggests that the company is not a 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 -2.55.
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 * 1.0558||+||0.528 * 1.0004||+||0.404 * 1.0587||+||0.892 * 1.0457||+||0.115 * 1.035|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9633||+||4.679 * -0.0011||-||0.327 * 0.9833|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|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.
Net Income was 42.5 + 71.2 + 42.7 + 46.5 = $203 Mil.
Non Operating Income was -38.5 + -7.3 + -3.7 + -25.7 = $-75 Mil.
Cash Flow from Operations was 117.8 + -108 + 224.4 + 49 = $283 Mil.
|Accounts Receivable was $1,010 Mil.
Revenue was 1552.3 + 1498.9 + 1483.1 + 1447 = $5,981 Mil.
Gross Profit was 417.5 + 401.7 + 382 + 381 = $1,582 Mil.
Total Current Assets was $2,589 Mil.
Total Assets was $5,191 Mil.
Property, Plant and Equipment(Net PPE) was $922 Mil.
Depreciation, Depletion and Amortization(DDA) was $213 Mil.
Selling, General & Admin. Expense(SGA) was $1,170 Mil.
Total Current Liabilities was $1,985 Mil.
Long-Term Debt was $951 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)|
|=||(1114.6 / 6254.7)||/||(1009.5 / 5981.3)|
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)|
|=||(407.2 / 5981.3)||/||(428.2 / 6254.7)|
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 - (2129.9 + 905.3) / 4616.6)||/||(1 - (2589 + 922.4) / 5191)|
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))|
|=||(213.3 / (213.3 + 922.4))||/||(200.7 / (200.7 + 905.3))|
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)|
|=||(1178.3 / 6254.7)||/||(1169.7 / 5981.3)|
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)|
|=||((945.2 + 1622.7) / 4616.6)||/||((951.4 + 1984.9) / 5191)|
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|
|=||(202.9 - -75.2||-||283.2)||/||4616.6|
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 -2.35 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