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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 The Estee Lauder Companies Inc was -2.04. The lowest was -3.23. And the median was -2.64.
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 The Estee Lauder Companies 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 * 1.0397||+||0.528 * 1.0033||+||0.404 * 1.4256||+||0.892 * 1.0282||+||0.115 * 1.0005|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0008||+||4.679 * -0.0508||-||0.327 * 1.189|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $1,508 Mil.|
Revenue was 3208 + 2865 + 2646.3 + 2656.5 = $11,376 Mil.
Gross Profit was 2571 + 2269 + 2135.6 + 2152.3 = $9,128 Mil.
Total Current Assets was $4,789 Mil.
Total Assets was $11,212 Mil.
Property, Plant and Equipment(Net PPE) was $1,563 Mil.
Depreciation, Depletion and Amortization(DDA) was $431 Mil.
Selling, General & Admin. Expense(SGA) was $7,388 Mil.
Total Current Liabilities was $4,458 Mil.
Long-Term Debt was $1,890 Mil.
Net Income was 428 + 294 + 93.5 + 265.6 = $1,081 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 974 + -150 + 472.5 + 354.2 = $1,651 Mil.
|Accounts Receivable was $1,411 Mil.
Revenue was 3124 + 2835 + 2524.4 + 2580.5 = $11,064 Mil.
Gross Profit was 2535 + 2258 + 2036.4 + 2077.6 = $8,907 Mil.
Total Current Assets was $4,476 Mil.
Total Assets was $8,582 Mil.
Property, Plant and Equipment(Net PPE) was $1,497 Mil.
Depreciation, Depletion and Amortization(DDA) was $413 Mil.
Selling, General & Admin. Expense(SGA) was $7,180 Mil.
Total Current Liabilities was $2,479 Mil.
Long-Term Debt was $1,607 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)|
|=||(1508 / 11375.8)||/||(1410.6 / 11063.9)|
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)|
|=||(8907 / 11063.9)||/||(9127.9 / 11375.8)|
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 - (4789 + 1563) / 11212)||/||(1 - (4475.8 + 1496.8) / 8582.1)|
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))|
|=||(412.7 / (412.7 + 1496.8))||/||(430.7 / (430.7 + 1563))|
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)|
|=||(7387.6 / 11375.8)||/||(7179.5 / 11063.9)|
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)|
|=||((1890 + 4458) / 11212)||/||((1607.3 + 2479.4) / 8582.1)|
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|
|=||(1081.1 - 0||-||1650.7)||/||11212|
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.
The Estee Lauder Companies Inc has a M-score of -2.54 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
The Estee Lauder Companies Inc Annual Data
The Estee Lauder Companies Inc Quarterly Data