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Diageo PLC (NYSE:DEO)
Beneish M-Score
0.00 (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 -2.36 suggests that the company is not a manipulator.

DEO' s 10-Year Beneish M-Score Range
Min: -2.69   Max: -2.26
Current: 0

-2.69
-2.26

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.


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 * 1.1188+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
=-2.36

* 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 $3,942 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

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)
=(3941.97952218 / 17505.1194539) / (3452.20030349 / 17151.7450683)
=0.2251901 / 0.201274
=1.1188

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)
=( / 17151.7450683) / ( / 17505.1194539)
=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 - (12745.7337884 + 5858.36177474) / 39187.7133106) / (1 - (12913.5053111 + 5197.26858877) / 37922.6100152)
=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
=17505.1194539 / 17151.7450683
=1.0206

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))
=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)
=(2764.50511945 / 17505.1194539) / (2684.37025797 / 17151.7450683)
=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)
=((13034.1296928 + 8278.15699659) / 39187.7133106) / ((12468.892261 + 8374.81031866) / 37922.6100152)
=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
=(3836.1774744 - 600.682593857 - 3054.60750853) / 39187.7133106
=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 -2.36 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 1.01671.07920.90650.94130.89020.98271.12061.1188
GMI 0.99860.99941.02731.00360.97390.9870.99171.0034
AQI 0.95411.05861.02720.97610.98041.06610.9631.0054
SGI 1.13671.05760.94590.98131.07341.0461.02161.0206
DEPI 1.01360.98520.91290.80961.10550.99771.1670.6723
SGAI 0.98071.04430.43531.02971.06681.01510.99611.0091
LVGI 1.13321.06971.01010.9660.96180.90971.00830.9895
TATA -0.0232-0.0107-0.0032-0.0364-0.0164-0.02220.01370.0046
M-score -2.51-2.41-2.52-2.74-2.60-2.51-2.29-2.36
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