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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 -2.29. The lowest was -3.67. And the median was -2.61.
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 * 1.0934||+||0.528 * 0.9805||+||0.404 * 1.0406||+||0.892 * 0.9793||+||0.115 * 1.1344|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9816||+||4.679 * -0.0352||-||0.327 * 1.049|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $1,070 Mil.|
Revenue was 1508.7 + 1541.5 + 1485.5 + 1454.8 = $5,991 Mil.
Gross Profit was 417.6 + 434.1 + 422.6 + 392.3 = $1,667 Mil.
Total Current Assets was $2,014 Mil.
Total Assets was $4,600 Mil.
Property, Plant and Equipment(Net PPE) was $905 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $1,084 Mil.
Total Current Liabilities was $2,056 Mil.
Long-Term Debt was $713 Mil.
Net Income was 89.1 + 80 + 89.6 + 57 = $316 Mil.
Non Operating Income was -4.6 + -50.2 + -5.6 + -19.3 = $-80 Mil.
Cash Flow from Operations was 149.7 + 222.3 + -6.3 + 191.5 = $557 Mil.
|Accounts Receivable was $999 Mil.
Revenue was 1468.1 + 1516 + 1528 + 1604.8 = $6,117 Mil.
Gross Profit was 405.9 + 417.6 + 430 + 415.1 = $1,669 Mil.
Total Current Assets was $1,916 Mil.
Total Assets was $4,249 Mil.
Property, Plant and Equipment(Net PPE) was $841 Mil.
Depreciation, Depletion and Amortization(DDA) was $196 Mil.
Selling, General & Admin. Expense(SGA) was $1,128 Mil.
Total Current Liabilities was $1,470 Mil.
Long-Term Debt was $969 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)|
|=||(1069.7 / 5990.5)||/||(999 / 6116.9)|
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)|
|=||(1668.6 / 6116.9)||/||(1666.6 / 5990.5)|
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 - (2013.6 + 905.4) / 4600.4)||/||(1 - (1916 + 840.6) / 4248.9)|
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))|
|=||(195.9 / (195.9 + 840.6))||/||(181 / (181 + 905.4))|
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)|
|=||(1084 / 5990.5)||/||(1127.6 / 6116.9)|
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)|
|=||((713 + 2056.1) / 4600.4)||/||((968.5 + 1469.5) / 4248.9)|
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|
|=||(315.7 - -79.7||-||557.2)||/||4600.4|
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 -2.57 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