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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 Express Scripts Holding Co was 2.22. The lowest was -2.92. 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 Holding Co 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 * 1.066||+||0.528 * 0.9606||+||0.404 * 0.9829||+||0.892 * 0.9856||+||0.115 * 1.0283|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8823||+||4.679 * -0.0293||-||0.327 * 1.0347|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $7,062 Mil.|
Revenue was 24863.3 + 25410.1 + 25222.3 + 24791.8 = $100,288 Mil.
Gross Profit was 2338.2 + 2274.1 + 2161.2 + 1847 = $8,621 Mil.
Total Current Assets was $12,363 Mil.
Total Assets was $51,745 Mil.
Property, Plant and Equipment(Net PPE) was $1,274 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,155 Mil.
Selling, General & Admin. Expense(SGA) was $3,533 Mil.
Total Current Liabilities was $16,428 Mil.
Long-Term Debt was $14,846 Mil.
Net Income was 1434.7 + 722.9 + 720.7 + 526.1 = $3,404 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 2248.9 + 1480.4 + 438.9 + 751.2 = $4,919 Mil.
|Accounts Receivable was $6,721 Mil.
Revenue was 26175.4 + 25222.6 + 25454.2 + 24899.6 = $101,752 Mil.
Gross Profit was 2263.2 + 2173.5 + 2131.2 + 1834 = $8,402 Mil.
Total Current Assets was $12,060 Mil.
Total Assets was $53,243 Mil.
Property, Plant and Equipment(Net PPE) was $1,291 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,359 Mil.
Selling, General & Admin. Expense(SGA) was $4,063 Mil.
Total Current Liabilities was $17,155 Mil.
Long-Term Debt was $13,946 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)|
|=||(7062.1 / 100287.5)||/||(6721.3 / 101751.8)|
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)|
|=||(8401.9 / 101751.8)||/||(8620.5 / 100287.5)|
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 - (12363.4 + 1273.6) / 51744.9)||/||(1 - (12059.5 + 1291.3) / 53243.3)|
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))|
|=||(2359.1 / (2359.1 + 1291.3))||/||(2154.6 / (2154.6 + 1273.6))|
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)|
|=||(3532.7 / 100287.5)||/||(4062.6 / 101751.8)|
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)|
|=||((14846 + 16428.1) / 51744.9)||/||((13946.3 + 17155.3) / 53243.3)|
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|
|=||(3404.4 - 0||-||4919.4)||/||51744.9|
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 Holding Co has a M-score of -2.58 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 Holding Co Annual Data
Express Scripts Holding Co Quarterly Data