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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 -2.22. The lowest was -3.08. 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 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 * 1.0255||+||0.528 * 0.9985||+||0.404 * 1.1931||+||0.892 * 1.0447||+||0.115 * 1.0382|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.993||+||4.679 * -0.0731||-||0.327 * 1.0992|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,258 Mil.|
Revenue was 2646.3 + 2656.5 + 3124.8 + 2834.7 = $11,262 Mil.
Gross Profit was 2135.6 + 2152.3 + 2535.8 + 2257.5 = $9,081 Mil.
Total Current Assets was $4,225 Mil.
Total Assets was $9,223 Mil.
Property, Plant and Equipment(Net PPE) was $1,583 Mil.
Depreciation, Depletion and Amortization(DDA) was $415 Mil.
Selling, General & Admin. Expense(SGA) was $7,338 Mil.
Total Current Liabilities was $2,681 Mil.
Long-Term Debt was $1,910 Mil.
Net Income was 93.5 + 265.6 + 446.2 + 309.3 = $1,115 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 472.5 + 353.9 + 954.1 + 8.2 = $1,789 Mil.
|Accounts Receivable was $1,175 Mil.
Revenue was 2524.4 + 2580.5 + 3044.5 + 2631 = $10,780 Mil.
Gross Profit was 2036.4 + 2077.6 + 2471.4 + 2094.4 = $8,680 Mil.
Total Current Assets was $4,184 Mil.
Total Assets was $8,227 Mil.
Property, Plant and Equipment(Net PPE) was $1,490 Mil.
Depreciation, Depletion and Amortization(DDA) was $409 Mil.
Selling, General & Admin. Expense(SGA) was $7,074 Mil.
Total Current Liabilities was $2,130 Mil.
Long-Term Debt was $1,595 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)|
|=||(1258.3 / 11262.3)||/||(1174.5 / 10780.4)|
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)|
|=||(8679.8 / 10780.4)||/||(9081.2 / 11262.3)|
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 - (4225.1 + 1583.3) / 9223.3)||/||(1 - (4183.6 + 1490.2) / 8226.9)|
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))|
|=||(409.3 / (409.3 + 1490.2))||/||(414.7 / (414.7 + 1583.3))|
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)|
|=||(7337.8 / 11262.3)||/||(7073.5 / 10780.4)|
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)|
|=||((1910 + 2680.5) / 9223.3)||/||((1595.1 + 2129.8) / 8226.9)|
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|
|=||(1114.6 - 0||-||1788.7)||/||9223.3|
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.
The Estee Lauder Companies Inc has a M-score of -2.71 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