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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 -2.51 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 -2.54.
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 * 1.3151||+||0.528 * 1.007||+||0.404 * 0.9824||+||0.892 * 0.9496||+||0.115 * 1.0282|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9785||+||4.679 * -0.0497||-||0.327 * 1.1349|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $6,385 Mil.|
Revenue was 25778.5 + 25111 + 23685 + 25781.4 = $100,356 Mil.
Gross Profit was 2073 + 2007.7 + 1750.4 + 2061 = $7,892 Mil.
Total Current Assets was $9,705 Mil.
Total Assets was $53,439 Mil.
Property, Plant and Equipment(Net PPE) was $1,640 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,281 Mil.
Selling, General & Admin. Expense(SGA) was $4,404 Mil.
Total Current Liabilities was $15,923 Mil.
Long-Term Debt was $11,442 Mil.
Net Income was 582.3 + 515.2 + 328.3 + 501.9 = $1,928 Mil.
Non Operating Income was 7.2 + 4.7 + 1.7 + 9.7 = $23 Mil.
Cash Flow from Operations was 435.1 + 735.5 + 454 + 2935.1 = $4,560 Mil.
|Accounts Receivable was $5,112 Mil.
Revenue was 25915.6 + 26381.9 + 26019.9 + 27365.1 = $105,683 Mil.
Gross Profit was 1994.2 + 2115.1 + 1962.1 + 2297.7 = $8,369 Mil.
Total Current Assets was $9,224 Mil.
Total Assets was $54,763 Mil.
Property, Plant and Equipment(Net PPE) was $1,629 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,425 Mil.
Selling, General & Admin. Expense(SGA) was $4,739 Mil.
Total Current Liabilities was $11,226 Mil.
Long-Term Debt was $13,482 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)|
|=||(6384.5 / 100355.9)||/||(5112.4 / 105682.5)|
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)|
|=||(2007.7 / 105682.5)||/||(2073 / 100355.9)|
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 - (9704.7 + 1639.9) / 53439.2)||/||(1 - (9224.2 + 1629.2) / 54763)|
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))|
|=||(2425.4 / (2425.4 + 1629.2))||/||(2281.2 / (2281.2 + 1639.9))|
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)|
|=||(4403.7 / 100355.9)||/||(4739.3 / 105682.5)|
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)|
|=||((11442 + 15922.5) / 53439.2)||/||((13482 + 11226.2) / 54763)|
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|
|=||(1927.7 - 23.3||-||4559.7)||/||53439.2|
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 -2.51 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