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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.
Baxter International Inc. has a M-score of -2.44 suggests that the company is not a 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 * 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|
|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
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)|
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)|
|=||(1946 / 14190)||/||(1954 / 15259)|
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 - (10004 + 7832) / 25869)||/||(1 - (9260 + 6098) / 20390)|
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))|
|=||(712 / (712 + 6098))||/||(823 / (823 + 7832))|
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)|
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)|
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|
|=||(2012 - 145||-||3198)||/||25869|
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.
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