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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 9.93. The lowest was -3.10. And the median was -2.58.
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 * 0.999||+||0.528 * 1.0039||+||0.404 * 0.9251||+||0.892 * 1.0966||+||0.115 * 1.0066|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.996||+||4.679 * -0.0271||-||0.327 * 1.0101|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was €397 Mil.|
Revenue was 477.536489854 + 426.765445402 + 538.520150555 + 446.028691081 = €1,889 Mil.
Gross Profit was 281.3999644 + 246.134159483 + 320.109244469 + 261.760670053 = €1,109 Mil.
Total Current Assets was €3,031 Mil.
Total Assets was €3,959 Mil.
Property, Plant and Equipment(Net PPE) was €294 Mil.
Depreciation, Depletion and Amortization(DDA) was €84 Mil.
Selling, General & Admin. Expense(SGA) was €461 Mil.
Total Current Liabilities was €465 Mil.
Long-Term Debt was €1,452 Mil.
Net Income was 114.112673549 + 84.4576149425 + 138.670705958 + 103.609551813 = €441 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 139.746351015 + 143.57579023 + 141.054805839 + 123.935667825 = €548 Mil.
|Accounts Receivable was €362 Mil.
Revenue was 440.826873385 + 425.394068188 + 473.536090835 + 382.684100256 = €1,722 Mil.
Gross Profit was 254.863227301 + 250.538667652 + 284.469586375 + 225.764724141 = €1,016 Mil.
Total Current Assets was €2,679 Mil.
Total Assets was €3,590 Mil.
Property, Plant and Equipment(Net PPE) was €289 Mil.
Depreciation, Depletion and Amortization(DDA) was €83 Mil.
Selling, General & Admin. Expense(SGA) was €422 Mil.
Total Current Liabilities was €487 Mil.
Long-Term Debt was €1,234 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)|
|=||(396.896582414 / 1888.85077689)||/||(362.276574891 / 1722.44113266)|
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)|
|=||(1015.63620547 / 1722.44113266)||/||(1109.4040384 / 1888.85077689)|
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 - (3031.27091492 + 293.907974368) / 3958.76913492)||/||(1 - (2679.28094092 + 289.491223381) / 3589.81021117)|
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))|
|=||(83.0016164053 / (83.0016164053 + 289.491223381))||/||(83.5606381874 / (83.5606381874 + 293.907974368))|
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)|
|=||(460.68518256 / 1888.85077689)||/||(421.770589561 / 1722.44113266)|
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)|
|=||((1452.20541118 + 465.115699537) / 3958.76913492)||/||((1234.07288604 + 487.119308563) / 3589.81021117)|
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|
|=||(440.850546263 - 0||-||548.312614908)||/||3958.76913492|
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 -2.55 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