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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 -2.90. And the median was -2.64.
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 * 0.8938||+||0.528 * 1.0201||+||0.404 * 0.8522||+||0.892 * 1.0738||+||0.115 * 0.9276|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0217||+||4.679 * -0.0128||-||0.327 * 1.0618|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $2,599 Mil.|
Revenue was 3764 + 4472 + 4197 + 4264 = $16,697 Mil.
Gross Profit was 1801 + 2224 + 2073 + 2041 = $8,139 Mil.
Total Current Assets was $9,734 Mil.
Total Assets was $24,861 Mil.
Property, Plant and Equipment(Net PPE) was $8,492 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,016 Mil.
Selling, General & Admin. Expense(SGA) was $4,144 Mil.
Total Current Liabilities was $6,074 Mil.
Long-Term Debt was $7,680 Mil.
Net Income was 430 + 953 + 468 + 520 = $2,371 Mil.
Non Operating Income was 74 + -123 + 0 + -15 = $-64 Mil.
Cash Flow from Operations was 96 + 1143 + 914 + 599 = $2,752 Mil.
|Accounts Receivable was $2,708 Mil.
Revenue was 3848 + 4322 + 3710 + 3669 = $15,549 Mil.
Gross Profit was 1891 + 1996 + 1906 + 1939 = $7,732 Mil.
Total Current Assets was $9,388 Mil.
Total Assets was $25,261 Mil.
Property, Plant and Equipment(Net PPE) was $7,962 Mil.
Depreciation, Depletion and Amortization(DDA) was $876 Mil.
Selling, General & Admin. Expense(SGA) was $3,777 Mil.
Total Current Liabilities was $5,645 Mil.
Long-Term Debt was $7,517 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)|
|=||(2599 / 16697)||/||(2708 / 15549)|
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)|
|=||(2224 / 15549)||/||(1801 / 16697)|
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 - (9734 + 8492) / 24861)||/||(1 - (9388 + 7962) / 25261)|
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))|
|=||(876 / (876 + 7962))||/||(1016 / (1016 + 8492))|
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)|
|=||(4144 / 16697)||/||(3777 / 15549)|
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)|
|=||((7680 + 6074) / 24861)||/||((7517 + 5645) / 25261)|
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|
|=||(2371 - -64||-||2752)||/||24861|
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 -2.65 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