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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 Estee Lauder Cos Inc was -2.02. The lowest was -3.21. And the median was -2.59.
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 Estee Lauder Cos 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 * 0.9046||+||0.528 * 0.9998||+||0.404 * 0.9609||+||0.892 * 1.0599||+||0.115 * 0.9445|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9858||+||4.679 * -0.0654||-||0.327 * 0.966|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $1,502 Mil.|
Revenue was 2631 + 2725.3 + 2549.8 + 3018.7 = $10,925 Mil.
Gross Profit was 2094.4 + 2191.5 + 2051.1 + 2437.1 = $8,774 Mil.
Total Current Assets was $4,728 Mil.
Total Assets was $7,664 Mil.
Property, Plant and Equipment(Net PPE) was $1,444 Mil.
Depreciation, Depletion and Amortization(DDA) was $396 Mil.
Selling, General & Admin. Expense(SGA) was $7,052 Mil.
Total Current Liabilities was $1,942 Mil.
Long-Term Debt was $1,319 Mil.
Net Income was 228.1 + 257.7 + 213.2 + 432.5 = $1,132 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 127.7 + 365.8 + 387 + 752.5 = $1,633 Mil.
|Accounts Receivable was $1,567 Mil.
Revenue was 2675 + 2407.4 + 2291.8 + 2933 = $10,307 Mil.
Gross Profit was 2130.9 + 1931.8 + 1848.7 + 2365 = $8,276 Mil.
Total Current Assets was $4,632 Mil.
Total Assets was $7,521 Mil.
Property, Plant and Equipment(Net PPE) was $1,364 Mil.
Depreciation, Depletion and Amortization(DDA) was $348 Mil.
Selling, General & Admin. Expense(SGA) was $6,749 Mil.
Total Current Liabilities was $1,988 Mil.
Long-Term Debt was $1,325 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)|
|=||(1502.1 / 10924.8)||/||(1566.7 / 10307.2)|
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)|
|=||(2191.5 / 10307.2)||/||(2094.4 / 10924.8)|
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 - (4727.9 + 1444.3) / 7664.3)||/||(1 - (4632.4 + 1364.4) / 7520.5)|
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))|
|=||(348.3 / (348.3 + 1364.4))||/||(396.3 / (396.3 + 1444.3))|
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)|
|=||(7052.1 / 10924.8)||/||(6749.3 / 10307.2)|
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)|
|=||((1319 + 1941.7) / 7664.3)||/||((1324.7 + 1987.6) / 7520.5)|
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|
|=||(1131.5 - 0||-||1633)||/||7664.3|
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.
Estee Lauder Cos Inc has a M-score of -2.83 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
Estee Lauder Cos Inc Annual Data
Estee Lauder Cos Inc Quarterly Data