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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 FMC Corporation was -2.03. The lowest was -3.32. And the median was -2.52.
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 FMC Corporation 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 * 0.9713||+||0.528 * 0.9957||+||0.404 * 0.9674||+||0.892 * 1.0092||+||0.115 * 0.6989|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.5583||+||4.679 * 0.0043||-||0.327 * 1.0535|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,537 Mil.|
Revenue was 659.4 + 1092.2 + 1015.9 + 987.8 = $3,755 Mil.
Gross Profit was 250.7 + 365.2 + 323.7 + 357.6 = $1,297 Mil.
Total Current Assets was $3,330 Mil.
Total Assets was $5,312 Mil.
Property, Plant and Equipment(Net PPE) was $903 Mil.
Depreciation, Depletion and Amortization(DDA) was $130 Mil.
Selling, General & Admin. Expense(SGA) was $800 Mil.
Total Current Liabilities was $2,016 Mil.
Long-Term Debt was $1,151 Mil.
Net Income was -46.8 + 76.5 + 56.3 + 109.1 = $195 Mil.
Non Operating Income was -0.1 + -1.5 + 0.4 + 0.2 = $-1 Mil.
Cash Flow from Operations was -297.2 + 172 + 86.6 + 211.9 = $173 Mil.
|Accounts Receivable was $1,568 Mil.
Revenue was 756.9 + 1130.7 + 957.4 + 876 = $3,721 Mil.
Gross Profit was 293 + 354.9 + 304.4 + 327.5 = $1,280 Mil.
Total Current Assets was $2,753 Mil.
Total Assets was $5,091 Mil.
Property, Plant and Equipment(Net PPE) was $1,269 Mil.
Depreciation, Depletion and Amortization(DDA) was $123 Mil.
Selling, General & Admin. Expense(SGA) was $509 Mil.
Total Current Liabilities was $1,727 Mil.
Long-Term Debt was $1,154 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)|
|=||(1537.4 / 3755.3)||/||(1568.3 / 3721)|
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)|
|=||(365.2 / 3721)||/||(250.7 / 3755.3)|
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 - (3329.6 + 902.6) / 5311.7)||/||(1 - (2752.5 + 1268.7) / 5090.7)|
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))|
|=||(122.5 / (122.5 + 1268.7))||/||(130.1 / (130.1 + 902.6))|
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)|
|=||(799.7 / 3755.3)||/||(508.5 / 3721)|
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)|
|=||((1150.9 + 2015.6) / 5311.7)||/||((1154 + 1726.7) / 5090.7)|
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|
|=||(195.1 - -1||-||173.3)||/||5311.7|
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.
FMC Corporation has a M-score of -2.64 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
FMC Corporation Annual Data
FMC Corporation Quarterly Data