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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 -2.13. 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 * 0.9939||+||0.528 * 0.9886||+||0.404 * 1.0695||+||0.892 * 1.1273||+||0.115 * 0.9722|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0551||+||4.679 * -0.0188||-||0.327 * 1.7743|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $3,995 Mil.|
Revenue was 5785 + 5387.2 + 5884.8 + 5023.4 = $22,080 Mil.
Gross Profit was 3149.4 + 2862.6 + 3013.3 + 2637 = $11,662 Mil.
Total Current Assets was $11,231 Mil.
Total Assets was $51,504 Mil.
Property, Plant and Equipment(Net PPE) was $2,785 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,210 Mil.
Selling, General & Admin. Expense(SGA) was $6,675 Mil.
Total Current Liabilities was $8,026 Mil.
Long-Term Debt was $12,008 Mil.
Net Income was 656.7 + 758.4 + 688.6 + 1403.3 = $3,507 Mil.
Non Operating Income was 0 + 223.4 + 0 + 12.4 = $236 Mil.
Cash Flow from Operations was 1281.8 + 772.8 + 1231.6 + 952.6 = $4,239 Mil.
|Accounts Receivable was $3,565 Mil.
Revenue was 4960.2 + 4694.7 + 5224.2 + 4707.1 = $19,586 Mil.
Gross Profit was 2644 + 2468.2 + 2662.4 + 2452.3 = $10,227 Mil.
Total Current Assets was $9,655 Mil.
Total Assets was $36,987 Mil.
Property, Plant and Equipment(Net PPE) was $2,161 Mil.
Depreciation, Depletion and Amortization(DDA) was $902 Mil.
Selling, General & Admin. Expense(SGA) was $5,612 Mil.
Total Current Liabilities was $5,056 Mil.
Long-Term Debt was $3,053 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)|
|=||(3994.8 / 22080.4)||/||(3565.2 / 19586.2)|
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)|
|=||(10226.9 / 19586.2)||/||(11662.3 / 22080.4)|
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 - (11231 + 2784.8) / 51503.7)||/||(1 - (9654.5 + 2161.3) / 36986.8)|
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))|
|=||(901.9 / (901.9 + 2161.3))||/||(1209.7 / (1209.7 + 2784.8))|
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)|
|=||(6674.7 / 22080.4)||/||(5611.6 / 19586.2)|
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)|
|=||((12007.7 + 8025.9) / 51503.7)||/||((3052.7 + 5055.6) / 36986.8)|
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|
|=||(3507 - 235.8||-||4238.8)||/||51503.7|
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 -2.70 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