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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 8 years, the highest Beneish M-Score of CareFusion Corp was 0.00. The lowest was 0.00. And the median was 0.00.
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 CareFusion Corp 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 * 0.9989||+||0.528 * 1.0455||+||0.404 * 0.9615||+||0.892 * 1.1476||+||0.115 * 0.9158|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9662||+||4.679 * -0.0051||-||0.327 * 1.2147|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $517 Mil.|
Revenue was 1069 + 922 + 1122 + 968 = $4,081 Mil.
Gross Profit was 535 + 457 + 547 + 472 = $2,011 Mil.
Total Current Assets was $3,275 Mil.
Total Assets was $9,198 Mil.
Property, Plant and Equipment(Net PPE) was $435 Mil.
Depreciation, Depletion and Amortization(DDA) was $206 Mil.
Selling, General & Admin. Expense(SGA) was $1,100 Mil.
Total Current Liabilities was $693 Mil.
Long-Term Debt was $1,988 Mil.
Net Income was 173 + 76 + 140 + 102 = $491 Mil.
Non Operating Income was 0 + -56 + 0 + 0 = $-56 Mil.
Cash Flow from Operations was 138 + 68 + 230 + 158 = $594 Mil.
|Accounts Receivable was $451 Mil.
Revenue was 922 + 830 + 903 + 901 = $3,556 Mil.
Gross Profit was 466 + 423 + 467 + 476 = $1,832 Mil.
Total Current Assets was $2,829 Mil.
Total Assets was $8,631 Mil.
Property, Plant and Equipment(Net PPE) was $446 Mil.
Depreciation, Depletion and Amortization(DDA) was $186 Mil.
Selling, General & Admin. Expense(SGA) was $992 Mil.
Total Current Liabilities was $1,072 Mil.
Long-Term Debt was $999 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)|
|=||(517 / 4081)||/||(451 / 3556)|
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)|
|=||(457 / 3556)||/||(535 / 4081)|
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 - (3275 + 435) / 9198)||/||(1 - (2829 + 446) / 8631)|
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))|
|=||(186 / (186 + 446))||/||(206 / (206 + 435))|
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)|
|=||(1100 / 4081)||/||(992 / 3556)|
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)|
|=||((1988 + 693) / 9198)||/||((999 + 1072) / 8631)|
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|
|=||(491 - -56||-||594)||/||9198|
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.
CareFusion Corp 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
CareFusion Corp Annual Data
CareFusion Corp Quarterly Data