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Diageo PLC (NYSE:DEO)
Beneish M-Score
-2.49 (As of Today)

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.

Diageo PLC has a M-score of -2.57 suggests that the company is not a manipulator.

DEO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Max: -2.05
Current: -2.49

-3.35
-2.05

During the past 13 years, the highest Beneish M-Score of Diageo PLC was -2.05. The lowest was -3.35. And the median was -2.50.


Definition

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 * 1.1492+0.528 * 0.9648+0.404 * 0.9881+0.892 * 0.8843+0.115 * 0.9807
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9889+4.679 * -0.0227-0.327 * 0.9778
=-2.57

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $3,060 Mil.
Revenue was $14,893 Mil.
Gross Profit was $8,855 Mil.
Total Current Assets was $12,574 Mil.
Total Assets was $40,470 Mil.
Property, Plant and Equipment(Net PPE) was $5,513 Mil.
Depreciation, Depletion and Amortization(DDA) was $672 Mil.
Selling, General & Admin. Expense(SGA) was $2,219 Mil.
Total Current Liabilities was $8,788 Mil.
Long-Term Debt was $11,464 Mil.
Net Income was $3,188 Mil.
Non Operating Income was $489 Mil.
Cash Flow from Operations was $3,619 Mil.
Accounts Receivable was $3,011 Mil.
Revenue was $16,843 Mil.
Gross Profit was $9,662 Mil.
Total Current Assets was $11,947 Mil.
Total Assets was $40,193 Mil.
Property, Plant and Equipment(Net PPE) was $5,748 Mil.
Depreciation, Depletion and Amortization(DDA) was $685 Mil.
Selling, General & Admin. Expense(SGA) was $2,537 Mil.
Total Current Liabilities was $8,240 Mil.
Long-Term Debt was $12,332 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(3059.65909091 / 14893.4659091) / (3010.90342679 / 16842.6791277)
=0.20543634 / 0.1787663
=1.1492

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(9661.99376947 / 16842.6791277) / (8855.11363636 / 14893.4659091)
=0.57366133 / 0.59456366
=0.9648

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (12573.8636364 + 5512.78409091) / 40470.1704545) / (1 - (11947.0404984 + 5747.6635514) / 40193.1464174)
=0.55308694 / 0.55975818
=0.9881

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=14893.4659091 / 16842.6791277
=0.8843

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))
=(685.358255452 / (685.358255452 + 5747.6635514)) / (671.875 / (671.875 + 5512.78409091))
=0.10653753 / 0.10863574
=0.9807

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)
=(2218.75 / 14893.4659091) / (2537.38317757 / 16842.6791277)
=0.14897473 / 0.15065199
=0.9889

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)
=((11464.4886364 + 8788.35227273) / 40470.1704545) / ((12331.7757009 + 8239.87538941) / 40193.1464174)
=0.50043874 / 0.51181987
=0.9778

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(3187.5 - 488.636363636 - 3619.31818182) / 40470.1704545
=-0.0227

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 -2.57 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Diageo PLC Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.00561.37420.83750.71990.98821.08821.09441.08580.91511.1492
GMI 0.99860.99941.02921.00170.97390.98670.99251.0031.05850.9648
AQI 0.95411.05861.03190.97170.98041.06610.95671.01211.06570.9881
SGI 1.10961.0690.95880.9481.11471.02751.06960.98070.97040.8843
DEPI 1.01360.98620.8660.85251.10551.00631.1570.67231.45350.9807
SGAI 0.98070.49410.93061.0181.06681.01470.99521.01040.95390.9889
LVGI 1.13321.06971.01440.98020.94380.90971.00790.98990.94110.9778
TATA -0.0232-0.0154-0.0057-0.0364-0.0211-0.02290.01380.0065-0.0278-0.0227
M-score -2.54-2.06-2.67-2.98-2.49-2.43-2.27-2.42-2.58-2.57
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