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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 -2.35.
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 * 1.0065||+||0.528 * 1.0487||+||0.404 * 0.9788||+||0.892 * 1.1112||+||0.115 * 0.9756|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9513||+||4.679 * -0.0364||-||0.327 * 1.0645|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $10,162 Mil.|
Revenue was 36332 + 37055 + 35021 + 34602 = $143,010 Mil.
Gross Profit was 6164 + 6633 + 6468 + 6324 = $25,589 Mil.
Total Current Assets was $25,622 Mil.
Total Assets was $73,930 Mil.
Property, Plant and Equipment(Net PPE) was $8,871 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,944 Mil.
Selling, General & Admin. Expense(SGA) was $16,682 Mil.
Total Current Liabilities was $19,713 Mil.
Long-Term Debt was $11,689 Mil.
Net Income was 1221 + 1321 + 948 + 1246 = $4,736 Mil.
Non Operating Income was 0 + 0 + -521 + 0 = $-521 Mil.
Cash Flow from Operations was 1984 + 3423 + 1645 + 897 = $7,949 Mil.
|Accounts Receivable was $9,086 Mil.
Revenue was 32689 + 32830 + 31932 + 31248 = $128,699 Mil.
Gross Profit was 5942 + 6339 + 6027 + 5841 = $24,149 Mil.
Total Current Assets was $24,460 Mil.
Total Assets was $72,822 Mil.
Property, Plant and Equipment(Net PPE) was $8,676 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,845 Mil.
Selling, General & Admin. Expense(SGA) was $15,782 Mil.
Total Current Liabilities was $16,213 Mil.
Long-Term Debt was $12,845 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)|
|=||(10162 / 143010)||/||(9086 / 128699)|
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)|
|=||(6633 / 128699)||/||(6164 / 143010)|
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 - (25622 + 8871) / 73930)||/||(1 - (24460 + 8676) / 72822)|
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))|
|=||(1845 / (1845 + 8676))||/||(1944 / (1944 + 8871))|
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)|
|=||(16682 / 143010)||/||(15782 / 128699)|
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)|
|=||((11689 + 19713) / 73930)||/||((12845 + 16213) / 72822)|
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|
|=||(4736 - -521||-||7949)||/||73930|
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 -2.54 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