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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 -2.46.
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 * 1.0113||+||0.528 * 1.0433||+||0.404 * 0.9954||+||0.892 * 1.0206||+||0.115 * 0.9236|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9665||+||4.679 * -0.0093||-||0.327 * 1.0756|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $1,479 Mil.|
Revenue was 1646 + 1557 + 1654 + 1537 = $6,394 Mil.
Gross Profit was 1006 + 983 + 1090 + 972 = $4,051 Mil.
Total Current Assets was $2,596 Mil.
Total Assets was $15,864 Mil.
Property, Plant and Equipment(Net PPE) was $488 Mil.
Depreciation, Depletion and Amortization(DDA) was $330 Mil.
Selling, General & Admin. Expense(SGA) was $1,669 Mil.
Total Current Liabilities was $1,579 Mil.
Long-Term Debt was $7,616 Mil.
Net Income was 219 + 279 + 286 + 250 = $1,034 Mil.
Non Operating Income was -16 + -10 + -52 + -18 = $-96 Mil.
Cash Flow from Operations was 625 + 258 + 331 + 63 = $1,277 Mil.
|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 $15,970 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 $6,002 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)|
|=||(1479 / 6394)||/||(1433 / 6265)|
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)|
|=||(983 / 6265)||/||(1006 / 6394)|
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 - (2596 + 488) / 15864)||/||(1 - (2491 + 554) / 15970)|
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))|
|=||(329 / (329 + 554))||/||(330 / (330 + 488))|
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)|
|=||(1669 / 6394)||/||(1692 / 6265)|
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)|
|=||((7616 + 1579) / 15864)||/||((6002 + 2604) / 15970)|
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|
|=||(1034 - -96||-||1277)||/||15864|
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