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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 Equifax Inc was -2.17. The lowest was -3.91. And the median was -2.69.
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 Equifax 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 * 0.9754||+||0.528 * 0.9839||+||0.404 * 0.9755||+||0.892 * 1.0932||+||0.115 * 1.0372|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0822||+||4.679 * -0.0617||-||0.327 * 1.053|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $368 Mil.|
Revenue was 678.1 + 651.8 + 624.6 + 613.4 = $2,568 Mil.
Gross Profit was 457.3 + 436.7 + 410 + 402.4 = $1,706 Mil.
Total Current Assets was $591 Mil.
Total Assets was $4,586 Mil.
Property, Plant and Equipment(Net PPE) was $316 Mil.
Depreciation, Depletion and Amortization(DDA) was $203 Mil.
Selling, General & Admin. Expense(SGA) was $844 Mil.
Total Current Liabilities was $785 Mil.
Long-Term Debt was $1,146 Mil.
Net Income was 111 + 88.3 + 98 + 92.7 = $390 Mil.
Non Operating Income was -13.9 + -0.5 + 3 + 3.2 = $-8 Mil.
Cash Flow from Operations was 186.7 + 102.9 + 202.8 + 188.8 = $681 Mil.
|Accounts Receivable was $345 Mil.
Revenue was 613.9 + 584.5 + 578.5 + 572 = $2,349 Mil.
Gross Profit was 401.6 + 377.7 + 381.3 + 375.2 = $1,536 Mil.
Total Current Assets was $554 Mil.
Total Assets was $4,766 Mil.
Property, Plant and Equipment(Net PPE) was $292 Mil.
Depreciation, Depletion and Amortization(DDA) was $200 Mil.
Selling, General & Admin. Expense(SGA) was $714 Mil.
Total Current Liabilities was $760 Mil.
Long-Term Debt was $1,146 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)|
|=||(368.2 / 2567.9)||/||(345.3 / 2348.9)|
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)|
|=||(436.7 / 2348.9)||/||(457.3 / 2567.9)|
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 - (591.2 + 315.6) / 4585.5)||/||(1 - (554.2 + 292.3) / 4766.3)|
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))|
|=||(199.9 / (199.9 + 292.3))||/||(203.1 / (203.1 + 315.6))|
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)|
|=||(844.4 / 2567.9)||/||(713.7 / 2348.9)|
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)|
|=||((1145.8 + 784.5) / 4585.5)||/||((1145.6 + 759.8) / 4766.3)|
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|
|=||(390 - -8.2||-||681.2)||/||4585.5|
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.
Equifax Inc has a M-score of -2.75 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
Equifax Inc Annual Data
Equifax Inc Quarterly Data