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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 -3.35. And the median was -2.50.
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 * 0.9151||+||0.528 * 1.0585||+||0.404 * 1.0657||+||0.892 * 0.9704||+||0.115 * 1.4535|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9539||+||4.679 * -0.0258||-||0.327 * 0.9411|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|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.
Net Income was $3,709 Mil.
Non Operating Income was $773 Mil.
Cash Flow from Operations was $3,974 Mil.
|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.
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)|
|=||(3010.90342679 / 16842.6791277)||/||(3390.86294416 / 17357.0219966)|
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)|
|=||(10539.7631134 / 17357.0219966)||/||(9661.99376947 / 16842.6791277)|
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 - (11947.0404984 + 5747.6635514) / 40193.1464174)||/||(1 - (12637.9018613 + 5808.79864636) / 38856.1759729)|
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))|
|=||(1064.29780034 / (1064.29780034 + 5808.79864636))||/||(685.358255452 / (685.358255452 + 5747.6635514))|
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)|
|=||(2537.38317757 / 16842.6791277)||/||(2741.11675127 / 17357.0219966)|
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)|
|=||((12331.7757009 + 8239.87538941) / 40193.1464174)||/||((12923.857868 + 8208.12182741) / 38856.1759729)|
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|
|=||(3708.72274143 - 772.585669782||-||3973.52024922)||/||40193.1464174|
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.
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