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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 Directv was -0.93. The lowest was -3.47. And the median was -2.98.
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 Directv 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 * 1.0496||+||0.528 * 1.016||+||0.404 * 0.8659||+||0.892 * 1.0474||+||0.115 * 1.022|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9979||+||4.679 * -0.1478||-||0.327 * 0.9169|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,800 Mil.|
Revenue was 8922 + 8374 + 8109 + 7855 = $33,260 Mil.
Gross Profit was 3900 + 3926 + 3930 + 3824 = $15,580 Mil.
Total Current Assets was $8,819 Mil.
Total Assets was $25,459 Mil.
Property, Plant and Equipment(Net PPE) was $9,761 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,943 Mil.
Selling, General & Admin. Expense(SGA) was $6,611 Mil.
Total Current Liabilities was $6,959 Mil.
Long-Term Debt was $19,485 Mil.
Net Income was 778 + 611 + 806 + 561 = $2,756 Mil.
Non Operating Income was 57 + 1 + 35 + 57 = $150 Mil.
Cash Flow from Operations was 1643 + 1662 + 1474 + 1590 = $6,369 Mil.
|Accounts Receivable was $2,547 Mil.
Revenue was 8594 + 7880 + 7700 + 7580 = $31,754 Mil.
Gross Profit was 3843 + 3758 + 3774 + 3737 = $15,112 Mil.
Total Current Assets was $5,953 Mil.
Total Assets was $21,905 Mil.
Property, Plant and Equipment(Net PPE) was $9,117 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,828 Mil.
Selling, General & Admin. Expense(SGA) was $6,325 Mil.
Total Current Liabilities was $6,530 Mil.
Long-Term Debt was $18,284 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)|
|=||(2800 / 33260)||/||(2547 / 31754)|
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)|
|=||(3926 / 31754)||/||(3900 / 33260)|
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 - (8819 + 9761) / 25459)||/||(1 - (5953 + 9117) / 21905)|
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))|
|=||(2828 / (2828 + 9117))||/||(2943 / (2943 + 9761))|
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)|
|=||(6611 / 33260)||/||(6325 / 31754)|
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)|
|=||((19485 + 6959) / 25459)||/||((18284 + 6530) / 21905)|
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|
|=||(2756 - 150||-||6369)||/||25459|
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.
Directv has a M-score of -3.10 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
Directv Annual Data
Directv Quarterly Data