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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 -2.62.
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 * 0.5408||+||0.528 * 0.1174||+||0.404 * 1.4301||+||0.892 * 0.7401||+||0.115 * 0.852|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2273||+||4.679 * -0.4028||-||0.327 * 1.3087|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $959 Mil.|
Revenue was 3527 + 3795 + 3681 + 4248 = $15,251 Mil.
Gross Profit was -3707 + -3917 + -3752 + -2176 = $-13,552 Mil.
Total Current Assets was $7,233 Mil.
Total Assets was $42,664 Mil.
Property, Plant and Equipment(Net PPE) was $30,819 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,280 Mil.
Selling, General & Admin. Expense(SGA) was $555 Mil.
Total Current Liabilities was $4,426 Mil.
Long-Term Debt was $19,638 Mil.
Net Income was -4173 + -4071 + -3819 + -1841 = $-13,904 Mil.
Non Operating Income was 38 + 2 + -40 + 37 = $37 Mil.
Cash Flow from Operations was 740 + 612 + 822 + 1069 = $3,243 Mil.
|Accounts Receivable was $2,396 Mil.
Revenue was 4153 + 5235 + 5696 + 5522 = $20,606 Mil.
Gross Profit was -2802 + -2066 + 1291 + 1427 = $-2,150 Mil.
Total Current Assets was $8,854 Mil.
Total Assets was $56,065 Mil.
Property, Plant and Equipment(Net PPE) was $42,973 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,836 Mil.
Selling, General & Admin. Expense(SGA) was $611 Mil.
Total Current Liabilities was $4,410 Mil.
Long-Term Debt was $19,754 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)|
|=||(959 / 15251)||/||(2396 / 20606)|
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)|
|=||(-2150 / 20606)||/||(-13552 / 15251)|
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 - (7233 + 30819) / 42664)||/||(1 - (8854 + 42973) / 56065)|
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))|
|=||(3836 / (3836 + 42973))||/||(3280 / (3280 + 30819))|
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)|
|=||(555 / 15251)||/||(611 / 20606)|
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)|
|=||((19638 + 4426) / 42664)||/||((19754 + 4410) / 56065)|
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|
|=||(-13904 - 37||-||3243)||/||42664|
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 -5.47 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