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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 * 0.9975||+||0.528 * 0.9948||+||0.404 * 0.9737||+||0.892 * 1.0783||+||0.115 * 0.9945|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0471||+||4.679 * -0.0613||-||0.327 * 1.0318|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $363 Mil.|
Revenue was 651.8 + 624.6 + 613.4 + 613.9 = $2,504 Mil.
Gross Profit was 436.7 + 410 + 402.4 + 401.6 = $1,651 Mil.
Total Current Assets was $585 Mil.
Total Assets was $4,595 Mil.
Property, Plant and Equipment(Net PPE) was $304 Mil.
Depreciation, Depletion and Amortization(DDA) was $204 Mil.
Selling, General & Admin. Expense(SGA) was $809 Mil.
Total Current Liabilities was $791 Mil.
Long-Term Debt was $1,146 Mil.
Net Income was 88.3 + 98 + 92.7 + 92.8 = $372 Mil.
Non Operating Income was -0.5 + 3 + 3.2 + 0.5 = $6 Mil.
Cash Flow from Operations was 102.9 + 202.8 + 195.6 + 146 = $647 Mil.
|Accounts Receivable was $337 Mil.
Revenue was 584.5 + 578.5 + 572 + 586.9 = $2,322 Mil.
Gross Profit was 377.7 + 381.3 + 375.2 + 388.7 = $1,523 Mil.
Total Current Assets was $525 Mil.
Total Assets was $4,750 Mil.
Property, Plant and Equipment(Net PPE) was $291 Mil.
Depreciation, Depletion and Amortization(DDA) was $193 Mil.
Selling, General & Admin. Expense(SGA) was $717 Mil.
Total Current Liabilities was $795 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)|
|=||(362.7 / 2503.7)||/||(337.2 / 2321.9)|
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)|
|=||(410 / 2321.9)||/||(436.7 / 2503.7)|
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 - (585 + 304) / 4595)||/||(1 - (524.5 + 291) / 4750.1)|
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))|
|=||(193.1 / (193.1 + 291))||/||(203.6 / (203.6 + 304))|
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)|
|=||(809.2 / 2503.7)||/||(716.7 / 2321.9)|
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 + 790.8) / 4595)||/||((1145.6 + 794.6) / 4750.1)|
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|
|=||(371.8 - 6.2||-||647.3)||/||4595|
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 -2.73 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