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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.
Diageo PLC has a M-score of -2.36 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Diageo PLC was -2.26. The lowest was -2.69. And the median was -2.44.
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 * 1.1188||+||0.528 * 1.0034||+||0.404 * 1.0054||+||0.892 * 1.0206||+||0.115 * 0.6723|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0091||+||4.679 * 0.0046||-||0.327 * 0.9895|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $3,942 Mil.|
Revenue was $17,505 Mil.
Gross Profit was $10,630 Mil.
Total Current Assets was $12,746 Mil.
Total Assets was $39,188 Mil.
Property, Plant and Equipment(Net PPE) was $5,858 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,073 Mil.
Selling, General & Admin. Expense(SGA) was $2,765 Mil.
Total Current Liabilities was $8,278 Mil.
Long-Term Debt was $13,034 Mil.
Net Income was $3,836 Mil.
Non Operating Income was $601 Mil.
Cash Flow from Operations was $3,055 Mil.
|Accounts Receivable was $3,452 Mil.
Revenue was $17,152 Mil.
Gross Profit was $10,451 Mil.
Total Current Assets was $12,914 Mil.
Total Assets was $37,923 Mil.
Property, Plant and Equipment(Net PPE) was $5,197 Mil.
Depreciation, Depletion and Amortization(DDA) was $604 Mil.
Selling, General & Admin. Expense(SGA) was $2,684 Mil.
Total Current Liabilities was $8,375 Mil.
Long-Term Debt was $12,469 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)|
|=||(3941.97952218 / 17505.1194539)||/||(3452.20030349 / 17151.7450683)|
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)|
|=||( / 17151.7450683)||/||( / 17505.1194539)|
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 - (12745.7337884 + 5858.36177474) / 39187.7133106)||/||(1 - (12913.5053111 + 5197.26858877) / 37922.6100152)|
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))|
|=||(603.945371775 / (603.945371775 + 5197.26858877))||/||(1073.37883959 / (1073.37883959 + 5858.36177474))|
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)|
|=||(2764.50511945 / 17505.1194539)||/||(2684.37025797 / 17151.7450683)|
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)|
|=||((13034.1296928 + 8278.15699659) / 39187.7133106)||/||((12468.892261 + 8374.81031866) / 37922.6100152)|
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|
|=||(3836.1774744 - 600.682593857||-||3054.60750853)||/||39187.7133106|
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 -2.36 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