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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 -2.41 suggests that the company is not a manipulator.

DEO' s 10-Year Beneish M-Score Range
Min: -2.89   Max: -2.05
Current: -2.49

-2.89
-2.05

During the past 13 years, the highest Beneish M-Score of Diageo PLC was -2.05. The lowest was -2.89. And the median was -2.46.


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 * 1.0926+0.528 * 1.0034+0.404 * 1.0054+0.892 * 0.992+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
=-2.41

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

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 $3,128 Mil.
Revenue was $17,497 Mil.
Gross Profit was $10,661 Mil.
Total Current Assets was $13,173 Mil.
Total Assets was $38,686 Mil.
Property, Plant and Equipment(Net PPE) was $5,302 Mil.
Depreciation, Depletion and Amortization(DDA) was $616 Mil.
Selling, General & Admin. Expense(SGA) was $2,738 Mil.
Total Current Liabilities was $8,543 Mil.
Long-Term Debt was $12,720 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)
=(3390.86294416 / 17357.0219966) / (3128.48297214 / 17496.9040248)
=0.19535972 / 0.17880209
=1.0926

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)
=( / 17496.9040248) / ( / 17357.0219966)
=0.60930726 / 0.60723338
=1.0034

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 - (12637.9018613 + 5808.79864636) / 38856.1759729) / (1 - (13173.374613 + 5301.85758514) / 38685.7585139)
=0.52525692 / 0.52242807
=1.0054

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
=17357.0219966 / 17496.9040248
=0.992

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))
=(616.099071207 / (616.099071207 + 5301.85758514)) / (1064.29780034 / (1064.29780034 + 5808.79864636))
=0.10410672 / 0.15484983
=0.6723

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) / (2738.39009288 / 17496.9040248)
=0.15792552 / 0.15650712
=1.0091

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) / ((12719.8142415 + 8543.34365325) / 38685.7585139)
=0.54385125 / 0.54963787
=0.9895

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
=(3803.72250423 - 595.600676819 - 3028.76480541) / 38856.1759729
=0.0046

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 -2.41 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

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
DSRI 0.98471.00561.37420.83750.71990.98821.07581.10021.0926
GMI 1.01360.99860.99941.02921.00170.97390.9870.99171.0034
AQI 0.98160.95411.05861.03190.97170.98041.06610.9631.0054
SGI 1.10541.10961.0690.95880.9481.11471.03931.04540.992
DEPI 1.12781.01360.98620.8660.85251.10550.99771.1670.6723
SGAI 0.91210.98070.49410.93061.0181.06681.01510.99611.0091
LVGI 1.00691.13321.06971.01440.98020.94380.90971.00830.9895
TATA 0.0011-0.0232-0.0154-0.0057-0.0364-0.0211-0.02220.01370.0046
M-score -2.37-2.54-2.06-2.67-2.98-2.49-2.43-2.29-2.41
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