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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 Discovery Communications Inc was 4.99. The lowest was -3.86. And the median was -2.39.
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 Discovery Communications Inc 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 * 0.9234||+||0.528 * 1.0513||+||0.404 * 1.0063||+||0.892 * 1.1319||+||0.115 * 0.9377|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9354||+||4.679 * -0.0121||-||0.327 * 1.0405|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,433 Mil.|
Revenue was 1676 + 1568 + 1610 + 1411 = $6,265 Mil.
Gross Profit was 1078 + 1039 + 1095 + 929 = $4,141 Mil.
Total Current Assets was $2,491 Mil.
Total Assets was $16,014 Mil.
Property, Plant and Equipment(Net PPE) was $554 Mil.
Depreciation, Depletion and Amortization(DDA) was $329 Mil.
Selling, General & Admin. Expense(SGA) was $1,692 Mil.
Total Current Liabilities was $2,604 Mil.
Long-Term Debt was $6,046 Mil.
Net Income was 250 + 280 + 379 + 230 = $1,139 Mil.
Non Operating Income was -31 + 14 + 35 + -4 = $14 Mil.
Cash Flow from Operations was 425 + 420 + 232 + 241 = $1,318 Mil.
|Accounts Receivable was $1,371 Mil.
Revenue was 1537 + 1375 + 1467 + 1156 = $5,535 Mil.
Gross Profit was 1062 + 940 + 1030 + 814 = $3,846 Mil.
Total Current Assets was $2,410 Mil.
Total Assets was $14,979 Mil.
Property, Plant and Equipment(Net PPE) was $514 Mil.
Depreciation, Depletion and Amortization(DDA) was $276 Mil.
Selling, General & Admin. Expense(SGA) was $1,598 Mil.
Total Current Liabilities was $1,294 Mil.
Long-Term Debt was $6,482 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)|
|=||(1433 / 6265)||/||(1371 / 5535)|
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)|
|=||(1039 / 5535)||/||(1078 / 6265)|
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 - (2491 + 554) / 16014)||/||(1 - (2410 + 514) / 14979)|
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))|
|=||(276 / (276 + 514))||/||(329 / (329 + 554))|
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)|
|=||(1692 / 6265)||/||(1598 / 5535)|
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)|
|=||((6046 + 2604) / 16014)||/||((6482 + 1294) / 14979)|
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|
|=||(1139 - 14||-||1318)||/||16014|
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.
Discovery Communications Inc has a M-score of -2.47 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
Discovery Communications Inc Annual Data
Discovery Communications Inc Quarterly Data