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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 Freeport-McMoRan Inc was 2.23. The lowest was -5.86. 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 Freeport-McMoRan Inc 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 * 0.916||+||0.528 * 1.1059||+||0.404 * 1.5264||+||0.892 * 1.1299||+||0.115 * 0.5488|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0078||+||4.679 * -0.074||-||0.327 * 0.9312|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $2,307 Mil.|
Revenue was 5696 + 5522 + 4985 + 5885 = $22,088 Mil.
Gross Profit was 1291 + 1427 + 1282 + 1930 = $5,930 Mil.
Total Current Assets was $9,031 Mil.
Total Assets was $63,976 Mil.
Property, Plant and Equipment(Net PPE) was $48,641 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,943 Mil.
Selling, General & Admin. Expense(SGA) was $657 Mil.
Total Current Liabilities was $6,343 Mil.
Long-Term Debt was $17,975 Mil.
Net Income was 562 + 492 + 520 + 695 = $2,269 Mil.
Non Operating Income was 81 + -3 + 33 + -16 = $95 Mil.
Cash Flow from Operations was 1926 + 1386 + 1201 + 2396 = $6,909 Mil.
|Accounts Receivable was $2,229 Mil.
Revenue was 6165 + 4288 + 4583 + 4513 = $19,549 Mil.
Gross Profit was 1914 + 905 + 1535 + 1450 = $5,804 Mil.
Total Current Assets was $9,606 Mil.
Total Assets was $62,598 Mil.
Property, Plant and Equipment(Net PPE) was $48,951 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,101 Mil.
Selling, General & Admin. Expense(SGA) was $577 Mil.
Total Current Liabilities was $4,498 Mil.
Long-Term Debt was $21,053 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)|
|=||(2307 / 22088)||/||(2229 / 19549)|
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)|
|=||(1427 / 19549)||/||(1291 / 22088)|
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 - (9031 + 48641) / 63976)||/||(1 - (9606 + 48951) / 62598)|
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))|
|=||(2101 / (2101 + 48951))||/||(3943 / (3943 + 48641))|
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)|
|=||(657 / 22088)||/||(577 / 19549)|
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)|
|=||((17975 + 6343) / 63976)||/||((21053 + 4498) / 62598)|
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|
|=||(2269 - 95||-||6909)||/||63976|
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.
Freeport-McMoRan Inc has a M-score of -2.55 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
Freeport-McMoRan Inc Annual Data
Freeport-McMoRan Inc Quarterly Data