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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 Waters Corp was -2.19. The lowest was -3.02. And the median was -2.56.
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 Waters Corp 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 * 1.0804||+||0.528 * 0.9845||+||0.404 * 0.8998||+||0.892 * 1.1621||+||0.115 * 0.9626|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9515||+||4.679 * -0.0226||-||0.327 * 1.0342|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was €364 Mil.|
Revenue was 425.394068188 + 473.536090835 + 382.684100256 + 354.604401266 = €1,636 Mil.
Gross Profit was 250.538667652 + 284.469586375 + 225.764724141 + 206.041068669 = €967 Mil.
Total Current Assets was €2,657 Mil.
Total Assets was €3,578 Mil.
Property, Plant and Equipment(Net PPE) was €293 Mil.
Depreciation, Depletion and Amortization(DDA) was €78 Mil.
Selling, General & Admin. Expense(SGA) was €410 Mil.
Total Current Liabilities was €498 Mil.
Long-Term Debt was €1,210 Mil.
Net Income was 88.7563522129 + 122.702351987 + 88.0709241872 + 71.0451166556 = €371 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 142.834703871 + 131.161394972 + 99.199968961 + 78.2601015677 = €451 Mil.
|Accounts Receivable was €290 Mil.
Revenue was 311.26310462 + 412.224247284 + 342.533892592 + 341.935117108 = €1,408 Mil.
Gross Profit was 175.539729593 + 245.28468324 + 199.048011385 + 199.185931934 = €819 Mil.
Total Current Assets was €1,885 Mil.
Total Assets was €2,639 Mil.
Property, Plant and Equipment(Net PPE) was €239 Mil.
Depreciation, Depletion and Amortization(DDA) was €60 Mil.
Selling, General & Admin. Expense(SGA) was €370 Mil.
Total Current Liabilities was €423 Mil.
Long-Term Debt was €795 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)|
|=||(364.38140996 / 1636.21866055)||/||(290.221965151 / 1407.9563616)|
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)|
|=||(284.469586375 / 1407.9563616)||/||(250.538667652 / 1636.21866055)|
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 - (2657.27894299 + 292.722904925) / 3578.23708768)||/||(1 - (1885.40886415 + 238.507700094) / 2638.8077507)|
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))|
|=||(60.4670586881 / (60.4670586881 + 238.507700094))||/||(77.862595085 / (77.862595085 + 292.722904925))|
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)|
|=||(409.577343533 / 1636.21866055)||/||(370.408314573 / 1407.9563616)|
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)|
|=||((1210.38529058 + 497.524715883) / 3578.23708768)||/||((795.314872388 + 422.563805943) / 2638.8077507)|
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|
|=||(370.574745043 - 0||-||451.456169372)||/||3578.23708768|
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.
Waters Corp has a M-score of -2.42 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
Waters Corp Annual Data
Waters Corp Quarterly Data