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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 CVS Health Corp was 0.22. The lowest was -3.17. And the median was -2.34.
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 CVS Health 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 * 1.0363||+||0.528 * 1.0581||+||0.404 * 0.9627||+||0.892 * 1.1025||+||0.115 * 0.9926|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9453||+||4.679 * -0.0376||-||0.327 * 1.0778|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $10,892 Mil.|
Revenue was 37169 + 36332 + 37055 + 35021 = $145,577 Mil.
Gross Profit was 6402 + 6164 + 6633 + 6468 = $25,667 Mil.
Total Current Assets was $26,401 Mil.
Total Assets was $74,668 Mil.
Property, Plant and Equipment(Net PPE) was $9,019 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,944 Mil.
Selling, General & Admin. Expense(SGA) was $16,706 Mil.
Total Current Liabilities was $20,386 Mil.
Long-Term Debt was $11,633 Mil.
Net Income was 1272 + 1221 + 1321 + 948 = $4,762 Mil.
Non Operating Income was 0 + 0 + 0 + -521 = $-521 Mil.
Cash Flow from Operations was 1037 + 1984 + 3423 + 1645 = $8,089 Mil.
|Accounts Receivable was $9,533 Mil.
Revenue was 34602 + 32689 + 32782 + 31968 = $132,041 Mil.
Gross Profit was 6324 + 5942 + 6331 + 6035 = $24,632 Mil.
Total Current Assets was $24,138 Mil.
Total Assets was $72,593 Mil.
Property, Plant and Equipment(Net PPE) was $8,820 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,884 Mil.
Selling, General & Admin. Expense(SGA) was $16,029 Mil.
Total Current Liabilities was $16,629 Mil.
Long-Term Debt was $12,252 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)|
|=||(10892 / 145577)||/||(9533 / 132041)|
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)|
|=||(6164 / 132041)||/||(6402 / 145577)|
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 - (26401 + 9019) / 74668)||/||(1 - (24138 + 8820) / 72593)|
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))|
|=||(1884 / (1884 + 8820))||/||(1944 / (1944 + 9019))|
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)|
|=||(16706 / 145577)||/||(16029 / 132041)|
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)|
|=||((11633 + 20386) / 74668)||/||((12252 + 16629) / 72593)|
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|
|=||(4762 - -521||-||8089)||/||74668|
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.
CVS Health Corp has a M-score of -2.53 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
CVS Health Corp Annual Data
CVS Health Corp Quarterly Data