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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 -7.17. And the median was -2.42.
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 * 0.9243||+||0.528 * 1.0445||+||0.404 * 1.0027||+||0.892 * 1.1785||+||0.115 * 0.8021|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9414||+||4.679 * -0.0065||-||0.327 * 1.0368|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $1,464 Mil.|
Revenue was 1568 + 1610 + 1411 + 1537 = $6,126 Mil.
Gross Profit was 1039 + 1095 + 929 + 1062 = $4,125 Mil.
Total Current Assets was $2,584 Mil.
Total Assets was $16,373 Mil.
Property, Plant and Equipment(Net PPE) was $525 Mil.
Depreciation, Depletion and Amortization(DDA) was $329 Mil.
Selling, General & Admin. Expense(SGA) was $1,673 Mil.
Total Current Liabilities was $2,548 Mil.
Long-Term Debt was $6,153 Mil.
Net Income was 280 + 379 + 230 + 289 = $1,178 Mil.
Non Operating Income was 14 + 35 + -4 + -8 = $37 Mil.
Cash Flow from Operations was 420 + 232 + 241 + 355 = $1,248 Mil.
|Accounts Receivable was $1,344 Mil.
Revenue was 1375 + 1467 + 1156 + 1200 = $5,198 Mil.
Gross Profit was 940 + 1030 + 814 + 872 = $3,656 Mil.
Total Current Assets was $2,364 Mil.
Total Assets was $14,867 Mil.
Property, Plant and Equipment(Net PPE) was $492 Mil.
Depreciation, Depletion and Amortization(DDA) was $220 Mil.
Selling, General & Admin. Expense(SGA) was $1,508 Mil.
Total Current Liabilities was $1,135 Mil.
Long-Term Debt was $6,485 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)|
|=||(1464 / 6126)||/||(1344 / 5198)|
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)|
|=||(1095 / 5198)||/||(1039 / 6126)|
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 - (2584 + 525) / 16373)||/||(1 - (2364 + 492) / 14867)|
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))|
|=||(220 / (220 + 492))||/||(329 / (329 + 525))|
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)|
|=||(1673 / 6126)||/||(1508 / 5198)|
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)|
|=||((6153 + 2548) / 16373)||/||((6485 + 1135) / 14867)|
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|
|=||(1178 - 37||-||1248)||/||16373|
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 -2.42 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