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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 * 0.4648||+||0.528 * 0.3673||+||0.404 * 1.2141||+||0.892 * 0.7537||+||0.115 * 0.8094|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2577||+||4.679 * -0.3791||-||0.327 * 1.2151|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $796 Mil.|
Revenue was 3334 + 3527 + 3795 + 3681 = $14,337 Mil.
Gross Profit was -545 + -3707 + -3917 + -3752 = $-11,921 Mil.
Total Current Assets was $10,700 Mil.
Total Assets was $41,296 Mil.
Property, Plant and Equipment(Net PPE) was $26,646 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,042 Mil.
Selling, General & Admin. Expense(SGA) was $564 Mil.
Total Current Liabilities was $4,540 Mil.
Long-Term Debt was $18,549 Mil.
Net Income was -479 + -4173 + -4071 + -3819 = $-12,542 Mil.
Non Operating Income was 64 + 38 + 2 + -40 = $64 Mil.
Cash Flow from Operations was 874 + 740 + 612 + 822 = $3,048 Mil.
|Accounts Receivable was $2,272 Mil.
Revenue was 3938 + 4153 + 5235 + 5696 = $19,022 Mil.
Gross Profit was -2232 + -2802 + -2066 + 1291 = $-5,809 Mil.
Total Current Assets was $8,697 Mil.
Total Assets was $54,008 Mil.
Property, Plant and Equipment(Net PPE) was $41,056 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,713 Mil.
Selling, General & Admin. Expense(SGA) was $595 Mil.
Total Current Liabilities was $4,739 Mil.
Long-Term Debt was $20,111 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)|
|=||(796 / 14337)||/||(2272 / 19022)|
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)|
|=||(-5809 / 19022)||/||(-11921 / 14337)|
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 - (10700 + 26646) / 41296)||/||(1 - (8697 + 41056) / 54008)|
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))|
|=||(3713 / (3713 + 41056))||/||(3042 / (3042 + 26646))|
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)|
|=||(564 / 14337)||/||(595 / 19022)|
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)|
|=||((18549 + 4540) / 41296)||/||((20111 + 4739) / 54008)|
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|
|=||(-12542 - 64||-||3048)||/||41296|
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 -5.35 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