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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.
Express Scripts has a M-score of -2.68 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Express Scripts was 2.37. The lowest was -3.09. And the median was -2.56.
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 Express Scripts 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 * 1.2056||+||0.528 * 1.0226||+||0.404 * 0.9525||+||0.892 * 0.9434||+||0.115 * 1.0063|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9566||+||4.679 * -0.0625||-||0.327 * 1.1589|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $5,178 Mil.|
Revenue was 25111 + 23685 + 25781.4 + 25915.6 = $100,493 Mil.
Gross Profit was 2007.7 + 1750.4 + 2061 + 1994.2 = $7,813 Mil.
Total Current Assets was $10,452 Mil.
Total Assets was $54,634 Mil.
Property, Plant and Equipment(Net PPE) was $1,644 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,348 Mil.
Selling, General & Admin. Expense(SGA) was $4,434 Mil.
Total Current Liabilities was $15,984 Mil.
Long-Term Debt was $12,166 Mil.
Net Income was 515.2 + 328.3 + 501.9 + 426.7 = $1,772 Mil.
Non Operating Income was 4.7 + 1.7 + 9.7 + 6.3 = $22 Mil.
Cash Flow from Operations was 735.5 + 454 + 2935.1 + 1039.9 = $5,165 Mil.
|Accounts Receivable was $4,553 Mil.
Revenue was 26425 + 26063 + 27033.6 + 26999.4 = $106,521 Mil.
Gross Profit was 2117.6 + 1966.6 + 2250.8 + 2134.5 = $8,470 Mil.
Total Current Assets was $8,303 Mil.
Total Assets was $54,582 Mil.
Property, Plant and Equipment(Net PPE) was $1,664 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,413 Mil.
Selling, General & Admin. Expense(SGA) was $4,913 Mil.
Total Current Liabilities was $10,618 Mil.
Long-Term Debt was $13,649 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)|
|=||(5178.2 / 100493)||/||(4552.8 / 106521)|
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)|
|=||(1750.4 / 106521)||/||(2007.7 / 100493)|
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 - (10452.4 + 1644.1) / 54633.8)||/||(1 - (8302.8 + 1663.6) / 54581.5)|
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))|
|=||(2412.6 / (2412.6 + 1663.6))||/||(2348 / (2348 + 1644.1))|
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)|
|=||(4433.8 / 100493)||/||(4913 / 106521)|
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)|
|=||((12165.5 + 15984.4) / 54633.8)||/||((13648.5 + 10618.3) / 54581.5)|
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|
|=||(1772.1 - 22.4||-||5164.5)||/||54633.8|
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.
Express Scripts has a M-score of -2.68 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
Express Scripts Annual Data
Express Scripts Quarterly Data