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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 -2.27. The lowest was -2.91. And the median was -2.57.
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 * 0.5634||+||0.528 * 0.9995||+||0.404 * 1.0314||+||0.892 * 1.4005||+||0.115 * 0.64|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.966||+||4.679 * -0.04||-||0.327 * 0.7328|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $3,082 Mil.|
Revenue was 4132.1 + 5785 + 5387.2 + 10452.4 = $25,757 Mil.
Gross Profit was 2286 + 3149.4 + 2862.6 + 5248.6 = $13,547 Mil.
Total Current Assets was $6,493 Mil.
Total Assets was $41,298 Mil.
Property, Plant and Equipment(Net PPE) was $2,255 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,265 Mil.
Selling, General & Admin. Expense(SGA) was $7,461 Mil.
Total Current Liabilities was $4,763 Mil.
Long-Term Debt was $7,503 Mil.
Net Income was 391.6 + 656.7 + 758.4 + 688.6 = $2,495 Mil.
Non Operating Income was -178.8 + 0 + 223.4 + 0 = $45 Mil.
Cash Flow from Operations was 818.2 + 1281.8 + 772.8 + 1231.6 = $4,104 Mil.
|Accounts Receivable was $3,906 Mil.
Revenue was 3512.2 + 4960.2 + 4694.7 + 5224.2 = $18,391 Mil.
Gross Profit was 1893.4 + 2644 + 2468.2 + 2662.4 = $9,668 Mil.
Total Current Assets was $8,932 Mil.
Total Assets was $49,708 Mil.
Property, Plant and Equipment(Net PPE) was $2,792 Mil.
Depreciation, Depletion and Amortization(DDA) was $834 Mil.
Selling, General & Admin. Expense(SGA) was $5,515 Mil.
Total Current Liabilities was $8,626 Mil.
Long-Term Debt was $11,523 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)|
|=||(3081.8 / 25756.7)||/||(3906.1 / 18391.3)|
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)|
|=||(9668 / 18391.3)||/||(13546.6 / 25756.7)|
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 - (6493.2 + 2255.1) / 41297.5)||/||(1 - (8931.8 + 2791.6) / 49707.9)|
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))|
|=||(833.8 / (833.8 + 2791.6))||/||(1265 / (1265 + 2255.1))|
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)|
|=||(7461.1 / 25756.7)||/||(5514.8 / 18391.3)|
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)|
|=||((7503.1 + 4763.4) / 41297.5)||/||((11522.7 + 8625.6) / 49707.9)|
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|
|=||(2495.3 - 44.6||-||4104.4)||/||41297.5|
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 -2.65 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