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Baxter International Inc. (NYSE:BAX)
Beneish M-Score
-2.44 (As of Today)

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.

Baxter International Inc. has a M-score of -2.44 suggests that the company is not a manipulator.

BAX' s 10-Year Beneish M-Score Range
Min: -2.84   Max: -2.4
Current: -2.44

-2.84
-2.4

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.


Definition

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 * 1.1163+0.528 * 1.0337+0.404 * 1.2583+0.892 * 1.0753+0.115 * 1.0995
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0298+4.679 * -0.0515-0.327 * 1.0697
=-2.44

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $2,911 Mil.
Revenue was 4368 + 3774 + 3669 + 3448 = $15,259 Mil.
Gross Profit was 1954 + 1946 + 1939 + 1756 = $7,595 Mil.
Total Current Assets was $10,004 Mil.
Total Assets was $25,869 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 $3,681 Mil.
Total Current Liabilities was $5,906 Mil.
Long-Term Debt was $8,126 Mil.
Net Income was 326 + 544 + 590 + 552 = $2,012 Mil.
Non Operating Income was 19 + 55 + 68 + 3 = $145 Mil.
Cash Flow from Operations was 1083 + 966 + 763 + 386 = $3,198 Mil.
Accounts Receivable was $2,425 Mil.
Revenue was 3753 + 3477 + 3572 + 3388 = $14,190 Mil.
Gross Profit was 1905 + 1810 + 1872 + 1714 = $7,301 Mil.
Total Current Assets was $9,260 Mil.
Total Assets was $20,390 Mil.
Property, Plant and Equipment(Net PPE) was $6,098 Mil.
Depreciation, Depletion and Amortization(DDA) was $712 Mil.
Selling, General & Admin. Expense(SGA) was $3,324 Mil.
Total Current Liabilities was $4,759 Mil.
Long-Term Debt was $5,580 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(2911 / 15259) / (2425 / 14190)
=0.19077266 / 0.170895
=1.1163

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1946 / 14190) / (1954 / 15259)
=0.51451727 / 0.49773904
=1.0337

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (10004 + 7832) / 25869) / (1 - (9260 + 6098) / 20390)
=0.31052611 / 0.24678764
=1.2583

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=15259 / 14190
=1.0753

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))
=(712 / (712 + 6098)) / (823 / (823 + 7832))
=0.10455213 / 0.09508954
=1.0995

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)
=(3681 / 15259) / (3324 / 14190)
=0.24123468 / 0.23424947
=1.0298

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)
=((8126 + 5906) / 25869) / ((5580 + 4759) / 20390)
=0.5424253 / 0.50706229
=1.0697

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(2012 - 145 - 3198) / 25869
=-0.0515

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 -2.44 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Baxter International Inc. Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.0230.81540.98771.01570.89141.14280.96240.98770.98111.1163
GMI 1.07830.99070.91050.93150.98710.95571.11970.91470.98571.0337
AQI 0.96991.02520.87160.89551.11370.95491.07221.05930.9611.2583
SGI 1.06791.03581.05371.08531.09631.01731.02241.08181.02141.0753
DEPI 0.87730.98491.02581.04410.9521.09420.95521.06541.03441.0995
SGAI 1.016811.06681.01790.97620.9951.04121.0031.03181.0298
LVGI 0.96890.88980.81371.00671.07271.00281.05511.04811.00681.0697
TATA -0.0442-0.0406-0.0494-0.037-0.0301-0.0373-0.0814-0.0267-0.0459-0.0462
M-score -2.58-2.77-2.72-2.64-2.62-2.54-2.81-2.57-2.72-2.42

Baxter International Inc. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.98860.98770.92030.8620.97370.98110.9731.02951.14041.1163
GMI 0.9530.91470.98630.98750.97980.98570.98230.98260.99041.0337
AQI 1.0311.05931.10161.03180.99030.9610.97390.84661.31481.2583
SGI 1.07661.08181.06041.03631.0171.02141.01811.02241.04371.0753
DEPI 1.03161.06541.02230.99561.04541.03441.04481.0821.17611.0995
SGAI 1.00641.0031.02331.03941.00521.03181.03671.03961.10531.0298
LVGI 0.99041.04811.04271.06391.05261.00680.9911.09711.06391.0697
TATA -0.0346-0.0267-0.0334-0.0471-0.0356-0.0398-0.0361-0.0307-0.0407-0.0515
M-score -2.59-2.57-2.64-2.82-2.68-2.69-2.68-2.68-2.40-2.44
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