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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 BHP Billiton Ltd was -2.17. The lowest was -12.64. And the median was -2.73.
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 BHP Billiton Ltd 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 * 0.9949||+||0.528 * 0.9494||+||0.404 * 1.2044||+||0.892 * 1.0188||+||0.115 * 0.8535|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.6922||+||4.679 * -0.0718||-||0.327 * 0.8789|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $4,620 Mil.|
Revenue was $67,206 Mil.
Gross Profit was $43,821 Mil.
Total Current Assets was $22,296 Mil.
Total Assets was $151,413 Mil.
Property, Plant and Equipment(Net PPE) was $108,787 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,701 Mil.
Selling, General & Admin. Expense(SGA) was $7,662 Mil.
Total Current Liabilities was $18,064 Mil.
Long-Term Debt was $30,327 Mil.
Net Income was $13,832 Mil.
Non Operating Income was $-656 Mil.
Cash Flow from Operations was $25,364 Mil.
|Accounts Receivable was $4,558 Mil.
Revenue was $65,968 Mil.
Gross Profit was $40,839 Mil.
Total Current Assets was $19,786 Mil.
Total Assets was $138,109 Mil.
Property, Plant and Equipment(Net PPE) was $102,927 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,945 Mil.
Selling, General & Admin. Expense(SGA) was $10,865 Mil.
Total Current Liabilities was $20,372 Mil.
Long-Term Debt was $29,847 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)|
|=||(4620 / 67206)||/||(4558 / 65968)|
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)|
|=||( / 65968)||/||( / 67206)|
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 - (22296 + 108787) / 151413)||/||(1 - (19786 + 102927) / 138109)|
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))|
|=||(6945 / (6945 + 102927))||/||(8701 / (8701 + 108787))|
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)|
|=||(7662 / 67206)||/||(10865 / 65968)|
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)|
|=||((30327 + 18064) / 151413)||/||((29847 + 20372) / 138109)|
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|
|=||(13832 - -656||-||25364)||/||151413|
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.
BHP Billiton Ltd has a M-score of -2.67 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
BHP Billiton Ltd Annual Data