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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 -0.83. The lowest was -3.07. And the median was -2.42.
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 * 1.1157||+||0.528 * 1.0518||+||0.404 * 1.0751||+||0.892 * 1.0999||+||0.115 * 1.0235|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9369||+||4.679 * -0.0339||-||0.327 * 1.2773|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $11,888 Mil.|
Revenue was 41146 + 38644 + 37169 + 36332 = $153,291 Mil.
Gross Profit was 7301 + 6661 + 6402 + 6164 = $26,528 Mil.
Total Current Assets was $30,378 Mil.
Total Assets was $93,657 Mil.
Property, Plant and Equipment(Net PPE) was $9,855 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,092 Mil.
Selling, General & Admin. Expense(SGA) was $17,074 Mil.
Total Current Liabilities was $23,169 Mil.
Long-Term Debt was $26,267 Mil.
Net Income was 1498 + 1246 + 1272 + 1221 = $5,237 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 3571 + 1820 + 1037 + 1984 = $8,412 Mil.
|Accounts Receivable was $9,687 Mil.
Revenue was 37055 + 35021 + 34602 + 32689 = $139,367 Mil.
Gross Profit was 6633 + 6468 + 6324 + 5942 = $25,367 Mil.
Total Current Assets was $25,983 Mil.
Total Assets was $74,187 Mil.
Property, Plant and Equipment(Net PPE) was $8,843 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,931 Mil.
Selling, General & Admin. Expense(SGA) was $16,568 Mil.
Total Current Liabilities was $19,027 Mil.
Long-Term Debt was $11,630 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)|
|=||(11888 / 153291)||/||(9687 / 139367)|
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)|
|=||(6661 / 139367)||/||(7301 / 153291)|
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 - (30378 + 9855) / 93657)||/||(1 - (25983 + 8843) / 74187)|
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))|
|=||(1931 / (1931 + 8843))||/||(2092 / (2092 + 9855))|
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)|
|=||(17074 / 153291)||/||(16568 / 139367)|
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)|
|=||((26267 + 23169) / 93657)||/||((11630 + 19027) / 74187)|
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|
|=||(5237 - 0||-||8412)||/||93657|
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 -2.46 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