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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 -2.43.
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 * 0.9099||+||0.528 * 1.0449||+||0.404 * 1.0047||+||0.892 * 1.0846||+||0.115 * 0.9487|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9515||+||4.679 * -0.0055||-||0.327 * 1.0438|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,505 Mil.|
Revenue was 1654 + 1537 + 1676 + 1568 = $6,435 Mil.
Gross Profit was 1090 + 972 + 1078 + 1039 = $4,179 Mil.
Total Current Assets was $2,468 Mil.
Total Assets was $15,729 Mil.
Property, Plant and Equipment(Net PPE) was $509 Mil.
Depreciation, Depletion and Amortization(DDA) was $334 Mil.
Selling, General & Admin. Expense(SGA) was $1,707 Mil.
Total Current Liabilities was $1,712 Mil.
Long-Term Debt was $6,856 Mil.
Net Income was 286 + 250 + 250 + 280 = $1,066 Mil.
Non Operating Income was -52 + -18 + -31 + 14 = $-87 Mil.
Cash Flow from Operations was 331 + 63 + 425 + 420 = $1,239 Mil.
|Accounts Receivable was $1,525 Mil.
Revenue was 1610 + 1411 + 1537 + 1375 = $5,933 Mil.
Gross Profit was 1095 + 929 + 1062 + 940 = $4,026 Mil.
Total Current Assets was $2,571 Mil.
Total Assets was $16,105 Mil.
Property, Plant and Equipment(Net PPE) was $538 Mil.
Depreciation, Depletion and Amortization(DDA) was $324 Mil.
Selling, General & Admin. Expense(SGA) was $1,654 Mil.
Total Current Liabilities was $2,360 Mil.
Long-Term Debt was $6,045 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)|
|=||(1505 / 6435)||/||(1525 / 5933)|
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)|
|=||(972 / 5933)||/||(1090 / 6435)|
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 - (2468 + 509) / 15729)||/||(1 - (2571 + 538) / 16105)|
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))|
|=||(324 / (324 + 538))||/||(334 / (334 + 509))|
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)|
|=||(1707 / 6435)||/||(1654 / 5933)|
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)|
|=||((6856 + 1712) / 15729)||/||((6045 + 2360) / 16105)|
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|
|=||(1066 - -87||-||1239)||/||15729|
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 -2.50 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