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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 -0.36. The lowest was -3.02. And the median was -2.63.
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 * 0.6563||+||0.528 * 1.0637||+||0.404 * 1.3847||+||0.892 * 0.9686||+||0.115 * 0.4632|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9128||+||4.679 * -0.0499||-||0.327 * 0.5948|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,813 Mil.|
Revenue was 2585 + 2375 + 2603 + 2487 = $10,050 Mil.
Gross Profit was 972 + 965 + 1072 + 1034 = $4,043 Mil.
Total Current Assets was $6,823 Mil.
Total Assets was $15,982 Mil.
Property, Plant and Equipment(Net PPE) was $4,329 Mil.
Depreciation, Depletion and Amortization(DDA) was $777 Mil.
Selling, General & Admin. Expense(SGA) was $2,877 Mil.
Total Current Liabilities was $3,723 Mil.
Long-Term Debt was $2,094 Mil.
Net Income was 1212 + 3380 + 205 + 1 = $4,798 Mil.
Non Operating Income was 1161 + 3169 + 59 + -91 = $4,298 Mil.
Cash Flow from Operations was 775 + -333 + 724 + 131 = $1,297 Mil.
|Accounts Receivable was $2,852 Mil.
Revenue was 2475 + 2403 + 2789 + 2709 = $10,376 Mil.
Gross Profit was 1021 + 1019 + 1207 + 1193 = $4,440 Mil.
Total Current Assets was $14,497 Mil.
Total Assets was $30,015 Mil.
Property, Plant and Equipment(Net PPE) was $8,967 Mil.
Depreciation, Depletion and Amortization(DDA) was $680 Mil.
Selling, General & Admin. Expense(SGA) was $3,254 Mil.
Total Current Liabilities was $6,312 Mil.
Long-Term Debt was $12,054 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)|
|=||(1813 / 10050)||/||(2852 / 10376)|
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)|
|=||(4440 / 10376)||/||(4043 / 10050)|
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 - (6823 + 4329) / 15982)||/||(1 - (14497 + 8967) / 30015)|
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))|
|=||(680 / (680 + 8967))||/||(777 / (777 + 4329))|
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)|
|=||(2877 / 10050)||/||(3254 / 10376)|
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)|
|=||((2094 + 3723) / 15982)||/||((12054 + 6312) / 30015)|
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|
|=||(4798 - 4298||-||1297)||/||15982|
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 -2.78 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