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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 -0.79. The lowest was -3.07. And the median was -2.39.
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 * 1.0711||+||0.528 * 1.0704||+||0.404 * 1.0498||+||0.892 * 1.104||+||0.115 * 1.0311|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9299||+||4.679 * -0.0347||-||0.327 * 1.2833|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $12,804 Mil.|
Revenue was 38644 + 37169 + 36332 + 37055 = $149,200 Mil.
Gross Profit was 6661 + 6402 + 6164 + 6633 = $25,860 Mil.
Total Current Assets was $30,753 Mil.
Total Assets was $92,362 Mil.
Property, Plant and Equipment(Net PPE) was $9,494 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,999 Mil.
Selling, General & Admin. Expense(SGA) was $16,814 Mil.
Total Current Liabilities was $21,434 Mil.
Long-Term Debt was $26,771 Mil.
Net Income was 1246 + 1272 + 1221 + 1321 = $5,060 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1820 + 1037 + 1984 + 3423 = $8,264 Mil.
|Accounts Receivable was $10,828 Mil.
Revenue was 35021 + 34602 + 32689 + 32830 = $135,142 Mil.
Gross Profit was 6468 + 6324 + 5942 + 6339 = $25,073 Mil.
Total Current Assets was $25,337 Mil.
Total Assets was $73,576 Mil.
Property, Plant and Equipment(Net PPE) was $8,694 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,900 Mil.
Selling, General & Admin. Expense(SGA) was $16,378 Mil.
Total Current Liabilities was $18,213 Mil.
Long-Term Debt was $11,709 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)|
|=||(12804 / 149200)||/||(10828 / 135142)|
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)|
|=||(6402 / 135142)||/||(6661 / 149200)|
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 - (30753 + 9494) / 92362)||/||(1 - (25337 + 8694) / 73576)|
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))|
|=||(1900 / (1900 + 8694))||/||(1999 / (1999 + 9494))|
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)|
|=||(16814 / 149200)||/||(16378 / 135142)|
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)|
|=||((26771 + 21434) / 92362)||/||((11709 + 18213) / 73576)|
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|
|=||(5060 - 0||-||8264)||/||92362|
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 -2.50 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