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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 -5.83. And the median was -2.63.
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 * 0.5008||+||0.528 * 1.3399||+||0.404 * 0.6035||+||0.892 * 0.9291||+||0.115 * 0.9606|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0743||+||4.679 * -0.2848||-||0.327 * 1.1205|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $885 Mil.|
Revenue was 3877 + 3334 + 3527 + 4786 = $15,524 Mil.
Gross Profit was 466 + -545 + -3707 + -3758 = $-7,544 Mil.
Total Current Assets was $11,505 Mil.
Total Assets was $41,400 Mil.
Property, Plant and Equipment(Net PPE) was $27,761 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,797 Mil.
Selling, General & Admin. Expense(SGA) was $558 Mil.
Total Current Liabilities was $4,488 Mil.
Long-Term Debt was $18,180 Mil.
Net Income was 217 + -479 + -4173 + -4040 = $-8,475 Mil.
Non Operating Income was 5 + 64 + 38 + 4 = $111 Mil.
Cash Flow from Operations was 980 + 874 + 740 + 612 = $3,206 Mil.
|Accounts Receivable was $1,902 Mil.
Revenue was 3382 + 3938 + 4153 + 5235 = $16,708 Mil.
Gross Profit was -3779 + -2232 + -2802 + -2066 = $-10,879 Mil.
Total Current Assets was $8,155 Mil.
Total Assets was $50,383 Mil.
Property, Plant and Equipment(Net PPE) was $37,925 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,656 Mil.
Selling, General & Admin. Expense(SGA) was $559 Mil.
Total Current Liabilities was $4,827 Mil.
Long-Term Debt was $19,792 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)|
|=||(885 / 15524)||/||(1902 / 16708)|
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)|
|=||(-10879 / 16708)||/||(-7544 / 15524)|
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 - (11505 + 27761) / 41400)||/||(1 - (8155 + 37925) / 50383)|
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))|
|=||(3656 / (3656 + 37925))||/||(2797 / (2797 + 27761))|
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)|
|=||(558 / 15524)||/||(559 / 16708)|
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)|
|=||((18180 + 4488) / 41400)||/||((19792 + 4827) / 50383)|
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|
|=||(-8475 - 111||-||3206)||/||41400|
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 -4.37 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