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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 -2.50 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Avery Dennison Corp was -2.28. The lowest was -3.67. 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 * 0.9979||+||0.528 * 0.9771||+||0.404 * 1.0533||+||0.892 * 1.0472||+||0.115 * 0.9831|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.98||+||4.679 * -0.0147||-||0.327 * 0.9988|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $1,017 Mil.|
Revenue was 1583.9 + 1504.9 + 1552.3 + 1498.9 = $6,140 Mil.
Gross Profit was 416.3 + 402.2 + 417.5 + 401.7 = $1,638 Mil.
Total Current Assets was $2,092 Mil.
Total Assets was $4,611 Mil.
Property, Plant and Equipment(Net PPE) was $923 Mil.
Depreciation, Depletion and Amortization(DDA) was $205 Mil.
Selling, General & Admin. Expense(SGA) was $1,179 Mil.
Total Current Liabilities was $1,554 Mil.
Long-Term Debt was $951 Mil.
Net Income was 42.7 + 46.5 + 68.8 + 57.8 = $216 Mil.
Non Operating Income was -3.7 + -25.7 + 0.3 + -7.5 = $-37 Mil.
Cash Flow from Operations was 224.4 + 49 + 112.4 + -65.7 = $320 Mil.
|Accounts Receivable was $973 Mil.
Revenue was 1483.1 + 1447 + 1490.4 + 1443 = $5,864 Mil.
Gross Profit was 382 + 381 + 388.1 + 377.1 = $1,528 Mil.
Total Current Assets was $2,412 Mil.
Total Assets was $5,105 Mil.
Property, Plant and Equipment(Net PPE) was $1,016 Mil.
Depreciation, Depletion and Amortization(DDA) was $221 Mil.
Selling, General & Admin. Expense(SGA) was $1,149 Mil.
Total Current Liabilities was $2,075 Mil.
Long-Term Debt was $702 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)|
|=||(1016.5 / 6140)||/||(972.8 / 5863.5)|
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)|
|=||(402.2 / 5863.5)||/||(416.3 / 6140)|
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 - (2091.8 + 922.5) / 4610.6)||/||(1 - (2411.7 + 1015.5) / 5105.3)|
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))|
|=||(220.6 / (220.6 + 1015.5))||/||(204.6 / (204.6 + 922.5))|
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)|
|=||(1179 / 6140)||/||(1148.9 / 5863.5)|
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)|
|=||((950.6 + 1554.1) / 4610.6)||/||((702.2 + 2074.5) / 5105.3)|
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|
|=||(215.8 - -36.6||-||320.1)||/||4610.6|
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 -2.50 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