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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 Baxter International Inc was -2.40. The lowest was -2.84. And the median was -2.59.
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 Baxter International 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 * 0.864||+||0.528 * 1.0203||+||0.404 * 0.9288||+||0.892 * 1.1145||+||0.115 * 0.9181|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9921||+||4.679 * -0.0233||-||0.327 * 0.9932|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,803 Mil.|
Revenue was 4472 + 4197 + 4264 + 3951 = $16,884 Mil.
Gross Profit was 2224 + 2073 + 2041 + 1961 = $8,299 Mil.
Total Current Assets was $10,351 Mil.
Total Assets was $25,917 Mil.
Property, Plant and Equipment(Net PPE) was $8,698 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,005 Mil.
Selling, General & Admin. Expense(SGA) was $4,049 Mil.
Total Current Liabilities was $6,042 Mil.
Long-Term Debt was $7,606 Mil.
Net Income was 953 + 468 + 520 + 556 = $2,497 Mil.
Non Operating Income was -123 + 0 + -15 + 24 = $-114 Mil.
Cash Flow from Operations was 1143 + 914 + 599 + 559 = $3,215 Mil.
|Accounts Receivable was $2,911 Mil.
Revenue was 4322 + 3710 + 3669 + 3448 = $15,149 Mil.
Gross Profit was 1996 + 1906 + 1939 + 1756 = $7,597 Mil.
Total Current Assets was $10,195 Mil.
Total Assets was $25,224 Mil.
Property, Plant and Equipment(Net PPE) was $7,832 Mil.
Depreciation, Depletion and Amortization(DDA) was $823 Mil.
Selling, General & Admin. Expense(SGA) was $3,662 Mil.
Total Current Liabilities was $5,248 Mil.
Long-Term Debt was $8,126 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)|
|=||(2803 / 16884)||/||(2911 / 15149)|
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)|
|=||(2073 / 15149)||/||(2224 / 16884)|
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 - (10351 + 8698) / 25917)||/||(1 - (10195 + 7832) / 25224)|
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))|
|=||(823 / (823 + 7832))||/||(1005 / (1005 + 8698))|
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)|
|=||(4049 / 16884)||/||(3662 / 15149)|
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)|
|=||((7606 + 6042) / 25917)||/||((8126 + 5248) / 25224)|
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|
|=||(2497 - -114||-||3215)||/||25917|
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.
Baxter International Inc has a M-score of -2.64 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
Baxter International Inc Annual Data
Baxter International Inc Quarterly Data