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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 Diageo PLC was -2.05. The lowest was -2.79. And the median was -2.46.
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 Diageo PLC 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 * 1.0858||+||0.528 * 1.003||+||0.404 * 1.0121||+||0.892 * 0.9807||+||0.115 * 0.6723|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0104||+||4.679 * 0.0046||-||0.327 * 0.9899|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $3,391 Mil.|
Revenue was $17,357 Mil.
Gross Profit was $10,540 Mil.
Total Current Assets was $12,638 Mil.
Total Assets was $38,856 Mil.
Property, Plant and Equipment(Net PPE) was $5,809 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,064 Mil.
Selling, General & Admin. Expense(SGA) was $2,741 Mil.
Total Current Liabilities was $8,208 Mil.
Long-Term Debt was $12,924 Mil.
Net Income was $3,804 Mil.
Non Operating Income was $596 Mil.
Cash Flow from Operations was $3,029 Mil.
|Accounts Receivable was $3,184 Mil.
Revenue was $17,698 Mil.
Gross Profit was $10,779 Mil.
Total Current Assets was $13,303 Mil.
Total Assets was $38,819 Mil.
Property, Plant and Equipment(Net PPE) was $5,368 Mil.
Depreciation, Depletion and Amortization(DDA) was $624 Mil.
Selling, General & Admin. Expense(SGA) was $2,766 Mil.
Total Current Liabilities was $8,582 Mil.
Long-Term Debt was $12,745 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)|
|=||(3390.86294416 / 17357.0219966)||/||(3184.21052632 / 17698.1424149)|
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)|
|=||( / 17698.1424149)||/||( / 17357.0219966)|
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 - (12637.9018613 + 5808.79864636) / 38856.1759729)||/||(1 - (13303.4055728 + 5368.42105263) / 38818.8854489)|
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))|
|=||(623.839009288 / (623.839009288 + 5368.42105263))||/||(1064.29780034 / (1064.29780034 + 5808.79864636))|
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)|
|=||(2741.11675127 / 17357.0219966)||/||(2766.25386997 / 17698.1424149)|
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)|
|=||((12923.857868 + 8208.12182741) / 38856.1759729)||/||((12744.5820433 + 8582.04334365) / 38818.8854489)|
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|
|=||(3803.72250423 - 595.600676819||-||3028.76480541)||/||38856.1759729|
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.
Diageo PLC 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
Diageo PLC Annual Data