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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 -5.82. And the median was -2.60.
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 * 1.0516||+||0.528 * -0.4306||+||0.404 * 0.8667||+||0.892 * 0.784||+||0.115 * 0.8528|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.095||+||4.679 * -0.2898||-||0.327 * 1.2855|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,902 Mil.|
Revenue was 3681 + 4248 + 4153 + 5235 = $17,317 Mil.
Gross Profit was -3752 + -2176 + -2802 + -2066 = $-10,796 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 $564 Mil.
Total Current Liabilities was $4,827 Mil.
Long-Term Debt was $19,792 Mil.
Net Income was -3819 + -1841 + -2464 + -2842 = $-10,966 Mil.
Non Operating Income was -40 + -55 + 7 + -2 = $-90 Mil.
Cash Flow from Operations was 822 + 1069 + 717 + 1118 = $3,726 Mil.
|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.
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)|
|=||(1902 / 17317)||/||(2307 / 22088)|
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)|
|=||(-2176 / 22088)||/||(-3752 / 17317)|
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 - (8155 + 37925) / 50383)||/||(1 - (9031 + 48641) / 63976)|
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))|
|=||(3943 / (3943 + 48641))||/||(3656 / (3656 + 37925))|
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 / 17317)||/||(657 / 22088)|
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)|
|=||((19792 + 4827) / 50383)||/||((17975 + 6343) / 63976)|
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|
|=||(-10966 - -90||-||3726)||/||50383|
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 -4.92 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