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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 -2.17. The lowest was -2.83. And the median was -2.60.
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 * 0.8901||+||0.528 * 1.0285||+||0.404 * 1.321||+||0.892 * 1.0196||+||0.115 * 0.9384|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8683||+||4.679 * -0.0634||-||0.327 * 0.77|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $1,952 Mil.|
Revenue was 2645 + 2558 + 2585 + 2375 = $10,163 Mil.
Gross Profit was 1102 + 1071 + 972 + 965 = $4,110 Mil.
Total Current Assets was $6,574 Mil.
Total Assets was $15,546 Mil.
Property, Plant and Equipment(Net PPE) was $4,289 Mil.
Depreciation, Depletion and Amortization(DDA) was $800 Mil.
Selling, General & Admin. Expense(SGA) was $2,739 Mil.
Total Current Liabilities was $2,744 Mil.
Long-Term Debt was $2,779 Mil.
Net Income was 243 + 130 + 1212 + 3380 = $4,965 Mil.
Non Operating Income was 10 + -44 + 1161 + 3169 = $4,296 Mil.
Cash Flow from Operations was 713 + 499 + 775 + -333 = $1,654 Mil.
|Accounts Receivable was $2,151 Mil.
Revenue was 2603 + 2487 + 2475 + 2403 = $9,968 Mil.
Gross Profit was 1072 + 1034 + 1021 + 1019 = $4,146 Mil.
Total Current Assets was $11,796 Mil.
Total Assets was $20,962 Mil.
Property, Plant and Equipment(Net PPE) was $4,386 Mil.
Depreciation, Depletion and Amortization(DDA) was $759 Mil.
Selling, General & Admin. Expense(SGA) was $3,094 Mil.
Total Current Liabilities was $5,750 Mil.
Long-Term Debt was $3,922 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)|
|=||(1952 / 10163)||/||(2151 / 9968)|
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)|
|=||(4146 / 9968)||/||(4110 / 10163)|
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 - (6574 + 4289) / 15546)||/||(1 - (11796 + 4386) / 20962)|
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))|
|=||(759 / (759 + 4386))||/||(800 / (800 + 4289))|
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)|
|=||(2739 / 10163)||/||(3094 / 9968)|
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)|
|=||((2779 + 2744) / 15546)||/||((3922 + 5750) / 20962)|
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|
|=||(4965 - 4296||-||1654)||/||15546|
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 -2.62 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