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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 -2.12. The lowest was -2.89. And the median was -2.53.
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 * 1.055||+||0.528 * 1||+||0.404 * 1.119||+||0.892 * 1.0645||+||0.115 * 1.1106|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0276||+||4.679 * -0.0153||-||0.327 * 1.631|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $3,871 Mil.|
Revenue was 5387.2 + 5884.8 + 5023.4 + 5127.1 = $21,423 Mil.
Gross Profit was 2862.6 + 3013.3 + 2637 + 2760.2 = $11,273 Mil.
Total Current Assets was $7,747 Mil.
Total Assets was $48,386 Mil.
Property, Plant and Equipment(Net PPE) was $2,873 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,114 Mil.
Selling, General & Admin. Expense(SGA) was $6,381 Mil.
Total Current Liabilities was $5,321 Mil.
Long-Term Debt was $12,195 Mil.
Net Income was 758.4 + 688.6 + 1403.3 + 695.6 = $3,546 Mil.
Non Operating Income was 223.4 + 0 + 12.4 + 0 = $236 Mil.
Cash Flow from Operations was 772.8 + 1231.6 + 952.6 + 1094 = $4,051 Mil.
|Accounts Receivable was $3,447 Mil.
Revenue was 4873.3 + 5417.2 + 4870.3 + 4963.6 = $20,124 Mil.
Gross Profit was 2600 + 2803.7 + 2565.7 + 2620.2 = $10,590 Mil.
Total Current Assets was $8,774 Mil.
Total Assets was $36,072 Mil.
Property, Plant and Equipment(Net PPE) was $2,136 Mil.
Depreciation, Depletion and Amortization(DDA) was $961 Mil.
Selling, General & Admin. Expense(SGA) was $5,833 Mil.
Total Current Liabilities was $4,953 Mil.
Long-Term Debt was $3,054 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)|
|=||(3871.2 / 21422.5)||/||(3446.9 / 20124.4)|
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)|
|=||(3013.3 / 20124.4)||/||(2862.6 / 21422.5)|
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 - (7747.2 + 2872.5) / 48385.6)||/||(1 - (8774.4 + 2135.9) / 36072.3)|
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))|
|=||(961.2 / (961.2 + 2135.9))||/||(1114 / (1114 + 2872.5))|
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)|
|=||(6380.6 / 21422.5)||/||(5833.1 / 20124.4)|
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)|
|=||((12194.7 + 5321.3) / 48385.6)||/||((3053.8 + 4952.7) / 36072.3)|
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|
|=||(3545.9 - 235.8||-||4051)||/||48385.6|
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 -2.59 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