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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 * 1.1444||+||0.528 * 1.0573||+||0.404 * 1.0798||+||0.892 * 1.12||+||0.115 * 0.9786|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9425||+||4.679 * -0.0397||-||0.327 * 1.2912|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $13,025 Mil.|
Revenue was 43215 + 41146 + 38644 + 37169 = $160,174 Mil.
Gross Profit was 6744 + 7301 + 6661 + 6402 = $27,108 Mil.
Total Current Assets was $29,413 Mil.
Total Assets was $92,634 Mil.
Property, Plant and Equipment(Net PPE) was $9,862 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,219 Mil.
Selling, General & Admin. Expense(SGA) was $17,610 Mil.
Total Current Liabilities was $24,537 Mil.
Long-Term Debt was $26,267 Mil.
Net Income was 1146 + 1498 + 1246 + 1272 = $5,162 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 2412 + 3571 + 1820 + 1037 = $8,840 Mil.
|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.
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)|
|=||(13025 / 160174)||/||(10162 / 143010)|
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)|
|=||(25589 / 143010)||/||(27108 / 160174)|
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 - (29413 + 9862) / 92634)||/||(1 - (25622 + 8871) / 73930)|
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))|
|=||(1944 / (1944 + 8871))||/||(2219 / (2219 + 9862))|
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)|
|=||(17610 / 160174)||/||(16682 / 143010)|
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 + 24537) / 92634)||/||((11689 + 19713) / 73930)|
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|
|=||(5162 - 0||-||8840)||/||92634|
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 -2.45 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