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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 0.20. The lowest was -3.17. And the median was -2.38.
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 * 0.9193||+||0.528 * 1.0484||+||0.404 * 1.0036||+||0.892 * 1.1575||+||0.115 * 0.8829|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9495||+||4.679 * -0.0613||-||0.327 * 1.0653|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $13,625 Mil.|
Revenue was 44615 + 43725 + 43215 + 41146 = $172,701 Mil.
Gross Profit was 7492 + 7015 + 6744 + 7301 = $28,552 Mil.
Total Current Assets was $30,939 Mil.
Total Assets was $94,156 Mil.
Property, Plant and Equipment(Net PPE) was $9,901 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,429 Mil.
Selling, General & Admin. Expense(SGA) was $18,480 Mil.
Total Current Liabilities was $26,741 Mil.
Long-Term Debt was $25,610 Mil.
Net Income was 1540 + 924 + 1146 + 1498 = $5,108 Mil.
Non Operating Income was -101 + -542 + 0 + 0 = $-643 Mil.
Cash Flow from Operations was 3925 + 1611 + 2412 + 3571 = $11,519 Mil.
|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.
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)|
|=||(13625 / 172701)||/||(12804 / 149200)|
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)|
|=||(25860 / 149200)||/||(28552 / 172701)|
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 - (30939 + 9901) / 94156)||/||(1 - (30753 + 9494) / 92362)|
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))|
|=||(1999 / (1999 + 9494))||/||(2429 / (2429 + 9901))|
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)|
|=||(18480 / 172701)||/||(16814 / 149200)|
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)|
|=||((25610 + 26741) / 94156)||/||((26771 + 21434) / 92362)|
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|
|=||(5108 - -643||-||11519)||/||94156|
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 -2.70 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