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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 Danaher Corp was -2.23. The lowest was -2.87. And the median was -2.51.
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 Danaher Corp 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 * 1.0107||+||0.528 * 0.9933||+||0.404 * 1.018||+||0.892 * 1.0416||+||0.115 * 0.9645|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0067||+||4.679 * -0.0356||-||0.327 * 1.0354|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $3,634 Mil.|
Revenue was 5417.2 + 4870.3 + 4963.6 + 4662.7 = $19,914 Mil.
Gross Profit was 2803.7 + 2565.7 + 2620.2 + 2452.9 = $10,443 Mil.
Total Current Assets was $9,431 Mil.
Total Assets was $36,992 Mil.
Property, Plant and Equipment(Net PPE) was $2,203 Mil.
Depreciation, Depletion and Amortization(DDA) was $939 Mil.
Selling, General & Admin. Expense(SGA) was $5,697 Mil.
Total Current Liabilities was $5,396 Mil.
Long-Term Debt was $3,402 Mil.
Net Income was 661.7 + 680.6 + 676.4 + 579.7 = $2,598 Mil.
Non Operating Income was 99.1 + 38.2 + 19.2 + 0 = $157 Mil.
Cash Flow from Operations was 1239.4 + 1016.1 + 991.7 + 511.2 = $3,758 Mil.
|Accounts Receivable was $3,452 Mil.
Revenue was 5266.7 + 4669.1 + 4737.5 + 4444.7 = $19,118 Mil.
Gross Profit was 2711.7 + 2424.7 + 2495.5 + 2325.7 = $9,958 Mil.
Total Current Assets was $9,114 Mil.
Total Assets was $34,672 Mil.
Property, Plant and Equipment(Net PPE) was $2,211 Mil.
Depreciation, Depletion and Amortization(DDA) was $895 Mil.
Selling, General & Admin. Expense(SGA) was $5,433 Mil.
Total Current Liabilities was $4,527 Mil.
Long-Term Debt was $3,437 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)|
|=||(3633.8 / 19913.8)||/||(3451.6 / 19118)|
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)|
|=||(2565.7 / 19118)||/||(2803.7 / 19913.8)|
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 - (9431.3 + 2203) / 36991.7)||/||(1 - (9113.7 + 2211.3) / 34672.2)|
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))|
|=||(895 / (895 + 2211.3))||/||(938.5 / (938.5 + 2203))|
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)|
|=||(5697 / 19913.8)||/||(5432.8 / 19118)|
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)|
|=||((3401.5 + 5396.4) / 36991.7)||/||((3436.7 + 4527.4) / 34672.2)|
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|
|=||(2598.4 - 156.5||-||3758.4)||/||36991.7|
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.
Danaher Corp has a M-score of -2.61 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
Danaher Corp Annual Data
Danaher Corp Quarterly Data