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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 -1.02. The lowest was -4.67. 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 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 * 0.9888||+||0.528 * 1.0057||+||0.404 * 0.1974||+||0.892 * 1.0425||+||0.115 * 0.7803|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8618||+||4.679 * -0.3712||-||0.327 * 1.4699|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $867 Mil.|
Revenue was 970.4 + 1261.2 + 1203 + 1187 = $4,622 Mil.
Gross Profit was 553.5 + 729.8 + 627 + 582.6 = $2,493 Mil.
Total Current Assets was $2,935 Mil.
Total Assets was $16,060 Mil.
Property, Plant and Equipment(Net PPE) was $12,535 Mil.
Depreciation, Depletion and Amortization(DDA) was $530 Mil.
Selling, General & Admin. Expense(SGA) was $132 Mil.
Total Current Liabilities was $1,105 Mil.
Long-Term Debt was $5,886 Mil.
Net Income was -3451.8 + 429.4 + -1172.7 + 292.5 = $-3,903 Mil.
Non Operating Income was 0 + -3.5 + 2.1 + 1.9 = $1 Mil.
Cash Flow from Operations was 472.6 + 596 + 572.7 + 416.6 = $2,058 Mil.
|Accounts Receivable was $841 Mil.
Revenue was 990.6 + 1162.2 + 1130.3 + 1149.9 = $4,433 Mil.
Gross Profit was 584.8 + 627.9 + 603.1 + 589.1 = $2,405 Mil.
Total Current Assets was $1,535 Mil.
Total Assets was $19,473 Mil.
Property, Plant and Equipment(Net PPE) was $14,311 Mil.
Depreciation, Depletion and Amortization(DDA) was $468 Mil.
Selling, General & Admin. Expense(SGA) was $147 Mil.
Total Current Liabilities was $1,047 Mil.
Long-Term Debt was $4,719 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)|
|=||(867.4 / 4621.6)||/||(841.4 / 4433)|
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)|
|=||(729.8 / 4433)||/||(553.5 / 4621.6)|
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 - (2934.8 + 12534.8) / 16059.9)||/||(1 - (1535.2 + 14311) / 19472.9)|
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))|
|=||(467.8 / (467.8 + 14311))||/||(530 / (530 + 12534.8))|
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)|
|=||(131.9 / 4621.6)||/||(146.8 / 4433)|
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)|
|=||((5885.6 + 1104.6) / 16059.9)||/||((4718.9 + 1047.3) / 19472.9)|
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|
|=||(-3902.6 - 0.5||-||2057.9)||/||16059.9|
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.
Ensco PLC has a M-score of -4.67 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