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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.
CVS Caremark Corp has a M-score of -2.43 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of CVS Caremark Corp was -0.79. The lowest was -3.07. And the median was -2.31.
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 Caremark 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 * 1.3086||+||0.528 * 0.9735||+||0.404 * 0.9297||+||0.892 * 1.0296||+||0.115 * 0.9465|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.5478||+||4.679 * -0.0167||-||0.327 * 1.124|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $8,729 Mil.|
Revenue was 32782 + 31968 + 31248 + 30763 = $126,761 Mil.
Gross Profit was 6331 + 6035 + 5836 + 5582 = $23,784 Mil.
Total Current Assets was $25,325 Mil.
Total Assets was $71,526 Mil.
Property, Plant and Equipment(Net PPE) was $8,615 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,870 Mil.
Selling, General & Admin. Expense(SGA) was $11,872 Mil.
Total Current Liabilities was $15,425 Mil.
Long-Term Debt was $12,841 Mil.
Net Income was 1261 + 1254 + 1121 + 956 = $4,592 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1538 + 1703 + 902 + 1640 = $5,783 Mil.
|Accounts Receivable was $6,479 Mil.
Revenue was 31381 + 30227 + 30714 + 30798 = $123,120 Mil.
Gross Profit was 6279 + 5647 + 5449 + 5113 = $22,488 Mil.
Total Current Assets was $20,161 Mil.
Total Assets was $66,221 Mil.
Property, Plant and Equipment(Net PPE) was $8,632 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,753 Mil.
Selling, General & Admin. Expense(SGA) was $7,450 Mil.
Total Current Liabilities was $14,150 Mil.
Long-Term Debt was $9,133 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)|
|=||(8729 / 126761)||/||(6479 / 123120)|
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)|
|=||(6035 / 123120)||/||(6331 / 126761)|
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 - (25325 + 8615) / 71526)||/||(1 - (20161 + 8632) / 66221)|
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))|
|=||(1753 / (1753 + 8632))||/||(1870 / (1870 + 8615))|
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)|
|=||(11872 / 126761)||/||(7450 / 123120)|
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)|
|=||((12841 + 15425) / 71526)||/||((9133 + 14150) / 66221)|
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|
|=||(4592 - 0||-||5783)||/||71526|
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 Caremark Corp has a M-score of -2.43 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 Caremark Corp Annual Data
CVS Caremark Corp Quarterly Data