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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 Ensco PLC was 0.01. The lowest was -4.71. 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 Ensco PLC 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 * 0.8851||+||0.528 * 1.0328||+||0.404 * 0.4026||+||0.892 * 0.8075||+||0.115 * 0.8098|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1164||+||4.679 * -0.236||-||0.327 * 1.1066|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $559 Mil.|
Revenue was 814 + 828.3 + 1012.2 + 1059 = $3,714 Mil.
Gross Profit was 450.3 + 413.1 + 578.7 + 556.4 = $1,999 Mil.
Total Current Assets was $2,323 Mil.
Total Assets was $13,610 Mil.
Property, Plant and Equipment(Net PPE) was $11,097 Mil.
Depreciation, Depletion and Amortization(DDA) was $546 Mil.
Selling, General & Admin. Expense(SGA) was $112 Mil.
Total Current Liabilities was $1,507 Mil.
Long-Term Debt was $4,991 Mil.
Net Income was 175.3 + -2471.8 + 292 + 260.3 = $-1,744 Mil.
Non Operating Income was -1.8 + 7 + 1.9 + -7.6 = $-1 Mil.
Cash Flow from Operations was 238.7 + 423.3 + 383.6 + 423.3 = $1,469 Mil.
|Accounts Receivable was $781 Mil.
Revenue was 1163.9 + 970.4 + 1261.2 + 1203 = $4,599 Mil.
Gross Profit was 645.6 + 553.5 + 729.8 + 627 = $2,556 Mil.
Total Current Assets was $3,054 Mil.
Total Assets was $16,346 Mil.
Property, Plant and Equipment(Net PPE) was $12,725 Mil.
Depreciation, Depletion and Amortization(DDA) was $503 Mil.
Selling, General & Admin. Expense(SGA) was $124 Mil.
Total Current Liabilities was $1,134 Mil.
Long-Term Debt was $5,919 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)|
|=||(558.5 / 3713.5)||/||(781.4 / 4598.5)|
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)|
|=||(2555.9 / 4598.5)||/||(1998.5 / 3713.5)|
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 - (2322.8 + 11097.1) / 13610)||/||(1 - (3053.8 + 12725.3) / 16346.2)|
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))|
|=||(502.6 / (502.6 + 12725.3))||/||(546.3 / (546.3 + 11097.1))|
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)|
|=||(111.7 / 3713.5)||/||(123.9 / 4598.5)|
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)|
|=||((4991 + 1507.4) / 13610)||/||((5919.3 + 1133.6) / 16346.2)|
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|
|=||(-1744.2 - -0.5||-||1468.9)||/||13610|
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.
Ensco PLC has a M-score of -4.16 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
Ensco PLC Annual Data
Ensco PLC Quarterly Data