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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 -2.21. The lowest was -6.80. And the median was -2.65.
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 * 1.0269||+||0.528 * 0.9676||+||0.404 * 0.9505||+||0.892 * 1.019||+||0.115 * 0.8824|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9451||+||4.679 * -0.0718||-||0.327 * 0.9221|
|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 $6,903 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 $4,415 Mil.
Revenue was $65,953 Mil.
Gross Profit was $41,610 Mil.
Total Current Assets was $18,953 Mil.
Total Assets was $139,178 Mil.
Property, Plant and Equipment(Net PPE) was $100,565 Mil.
Depreciation, Depletion and Amortization(DDA) was $7,031 Mil.
Selling, General & Admin. Expense(SGA) was $7,168 Mil.
Total Current Liabilities was $20,139 Mil.
Long-Term Debt was $28,099 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)||/||(4415 / 65953)|
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)|
|=||( / 65953)||/||( / 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 - (18953 + 100565) / 139178)|
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))|
|=||(7031 / (7031 + 100565))||/||(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)|
|=||(6903 / 67206)||/||(7168 / 65953)|
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)||/||((28099 + 20139) / 139178)|
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 -2.79 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