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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 DaVita Inc was -0.76. The lowest was -3.51. And the median was -2.58.
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 DaVita 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 * 1.0148||+||0.528 * 1.0212||+||0.404 * 1.0057||+||0.892 * 1.0727||+||0.115 * 1.0405|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0587||+||4.679 * -0.0642||-||0.327 * 1.0087|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $1,850 Mil.|
Revenue was 3730.576 + 3717.651 + 3581.136 + 3533.589 = $14,563 Mil.
Gross Profit was 1032.947 + 1046.626 + 998.803 + 1018.458 = $4,097 Mil.
Total Current Assets was $4,261 Mil.
Total Assets was $18,926 Mil.
Property, Plant and Equipment(Net PPE) was $3,045 Mil.
Depreciation, Depletion and Amortization(DDA) was $695 Mil.
Selling, General & Admin. Expense(SGA) was $1,589 Mil.
Total Current Liabilities was $2,639 Mil.
Long-Term Debt was $8,972 Mil.
Net Income was 571.332 + 53.382 + 97.434 + -6 = $716 Mil.
Non Operating Income was 1.876 + 3.215 + 2.976 + 4.631 = $13 Mil.
Cash Flow from Operations was 535.623 + 516.637 + 429.002 + 436.673 = $1,918 Mil.
|Accounts Receivable was $1,700 Mil.
Revenue was 3525.665 + 3434.618 + 3287.965 + 3328.017 = $13,576 Mil.
Gross Profit was 1024.65 + 988.542 + 925.353 + 961.556 = $3,900 Mil.
Total Current Assets was $4,738 Mil.
Total Assets was $18,895 Mil.
Property, Plant and Equipment(Net PPE) was $2,622 Mil.
Depreciation, Depletion and Amortization(DDA) was $628 Mil.
Selling, General & Admin. Expense(SGA) was $1,399 Mil.
Total Current Liabilities was $2,411 Mil.
Long-Term Debt was $9,082 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)|
|=||(1850.425 / 14562.952)||/||(1699.892 / 13576.265)|
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)|
|=||(3900.101 / 13576.265)||/||(4096.834 / 14562.952)|
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 - (4261.359 + 3044.988) / 18925.653)||/||(1 - (4737.886 + 2621.918) / 18894.828)|
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))|
|=||(628.294 / (628.294 + 2621.918))||/||(694.805 / (694.805 + 3044.988))|
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)|
|=||(1589.096 / 14562.952)||/||(1399.24 / 13576.265)|
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)|
|=||((8972.002 + 2639.469) / 18925.653)||/||((9082.096 + 2410.554) / 18894.828)|
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|
|=||(716.148 - 12.698||-||1917.935)||/||18925.653|
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.
DaVita Inc has a M-score of -2.70 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
DaVita Inc Annual Data
DaVita Inc Quarterly Data