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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 -2.57.
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 * 0.6605||+||0.528 * 1.0286||+||0.404 * 0.4282||+||0.892 * 0.7372||+||0.115 * 0.9475|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2378||+||4.679 * -0.2445||-||0.327 * 0.9493|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $356 Mil.|
Revenue was 548.2 + 909.6 + 814 + 828.3 = $3,100 Mil.
Gross Profit was 250.1 + 559.4 + 450.3 + 413.1 = $1,673 Mil.
Total Current Assets was $2,466 Mil.
Total Assets was $13,602 Mil.
Property, Plant and Equipment(Net PPE) was $10,960 Mil.
Depreciation, Depletion and Amortization(DDA) was $465 Mil.
Selling, General & Admin. Expense(SGA) was $106 Mil.
Total Current Liabilities was $590 Mil.
Long-Term Debt was $4,677 Mil.
Net Income was 85.3 + 590.6 + 175.3 + -2471.8 = $-1,621 Mil.
Non Operating Income was 18.7 + 261.4 + -1.8 + 7 = $285 Mil.
Cash Flow from Operations was 194.4 + 562.9 + 238.7 + 423.3 = $1,419 Mil.
|Accounts Receivable was $731 Mil.
Revenue was 1012.2 + 1059 + 1163.9 + 970.4 = $4,206 Mil.
Gross Profit was 578.7 + 556.4 + 645.6 + 553.5 = $2,334 Mil.
Total Current Assets was $2,413 Mil.
Total Assets was $16,441 Mil.
Property, Plant and Equipment(Net PPE) was $13,529 Mil.
Depreciation, Depletion and Amortization(DDA) was $542 Mil.
Selling, General & Admin. Expense(SGA) was $117 Mil.
Total Current Liabilities was $803 Mil.
Long-Term Debt was $5,903 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)|
|=||(355.7 / 3100.1)||/||(730.6 / 4205.5)|
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)|
|=||(2334.2 / 4205.5)||/||(1672.9 / 3100.1)|
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 - (2465.7 + 10959.7) / 13602.3)||/||(1 - (2412.6 + 13528.9) / 16440.8)|
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))|
|=||(542.1 / (542.1 + 13528.9))||/||(464.5 / (464.5 + 10959.7))|
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)|
|=||(106.3 / 3100.1)||/||(116.5 / 4205.5)|
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)|
|=||((4677 + 590.2) / 13602.3)||/||((5903.3 + 803.1) / 16440.8)|
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|
|=||(-1620.6 - 285.3||-||1419.3)||/||13602.3|
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 -4.42 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