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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 0.15. The lowest was -3.63. And the median was -2.97.
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 * 1.0132||+||0.528 * 1.0189||+||0.404 * 0.9117||+||0.892 * 1.0474||+||0.115 * 0.9992|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.968||+||4.679 * -0.1477||-||0.327 * 0.8873|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $2,635 Mil.|
Revenue was 8143 + 8922 + 8374 + 8109 = $33,548 Mil.
Gross Profit was 3869 + 3900 + 3926 + 3930 = $15,625 Mil.
Total Current Assets was $8,046 Mil.
Total Assets was $24,301 Mil.
Property, Plant and Equipment(Net PPE) was $9,500 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,959 Mil.
Selling, General & Admin. Expense(SGA) was $6,480 Mil.
Total Current Liabilities was $7,564 Mil.
Long-Term Debt was $17,058 Mil.
Net Income was 730 + 778 + 611 + 806 = $2,925 Mil.
Non Operating Income was 7 + 57 + 1 + 35 = $100 Mil.
Cash Flow from Operations was 1636 + 1643 + 1662 + 1474 = $6,415 Mil.
|Accounts Receivable was $2,483 Mil.
Revenue was 7855 + 8594 + 7880 + 7700 = $32,029 Mil.
Gross Profit was 3824 + 3843 + 3758 + 3774 = $15,199 Mil.
Total Current Assets was $6,449 Mil.
Total Assets was $22,520 Mil.
Property, Plant and Equipment(Net PPE) was $9,205 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,864 Mil.
Selling, General & Admin. Expense(SGA) was $6,391 Mil.
Total Current Liabilities was $7,378 Mil.
Long-Term Debt was $18,338 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)|
|=||(2635 / 33548)||/||(2483 / 32029)|
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)|
|=||(3900 / 32029)||/||(3869 / 33548)|
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 - (8046 + 9500) / 24301)||/||(1 - (6449 + 9205) / 22520)|
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))|
|=||(2864 / (2864 + 9205))||/||(2959 / (2959 + 9500))|
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)|
|=||(6480 / 33548)||/||(6391 / 32029)|
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)|
|=||((17058 + 7564) / 24301)||/||((18338 + 7378) / 22520)|
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|
|=||(2925 - 100||-||6415)||/||24301|
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