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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 10-Year Beneish M-Score Range
Min: -2.79   Max: -2.05
Current: -2.49

-2.79
-2.05

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.


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 * 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
=-2.57

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

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

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)
=(3010.90342679 / 16842.6791277) / (3390.86294416 / 17357.0219966)
=0.1787663 / 0.19535972
=0.9151

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)
=( / 17357.0219966) / ( / 16842.6791277)
=0.60723338 / 0.57366133
=1.0585

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 - (11947.0404984 + 5747.6635514) / 40193.1464174) / (1 - (12637.9018613 + 5808.79864636) / 38856.1759729)
=0.55975818 / 0.52525692
=1.0657

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
=16842.6791277 / 17357.0219966
=0.9704

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))
=0.15484983 / 0.10653753
=1.4535

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)
=0.15065199 / 0.15792552
=0.9539

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)
=0.51181987 / 0.54385125
=0.9411

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
=(3708.72274143 - 772.585669782 - 3973.52024922) / 40193.1464174
=-0.0258

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

Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15
DSRI 0.98471.00561.37420.86040.94130.73581.07581.10711.08580.9151
GMI 1.01360.99860.99941.02731.00360.97390.9870.99221.0031.0585
AQI 0.98160.95411.05861.02720.97610.98041.06610.95671.01211.0657
SGI 1.10541.10961.0690.95880.9481.11471.03931.05740.98070.9704
DEPI 1.12781.01360.98620.9120.80961.10550.99771.1670.67231.4535
SGAI 0.91210.98070.49410.92011.02971.06681.01510.99471.01040.9539
LVGI 1.00691.13321.06971.01010.9660.96180.90971.00790.98990.9411
TATA 0.0011-0.0232-0.0154-0.0032-0.0364-0.0164-0.02220.01380.0046-0.0258
M-score -2.37-2.54-2.06-2.63-2.77-2.71-2.43-2.27-2.43-2.57
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