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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 -2.32. The lowest was -2.96. And the median was -2.47.
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 * 1.0512||+||0.528 * 1.0045||+||0.404 * 0.9254||+||0.892 * 1.065||+||0.115 * 0.9354|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9895||+||4.679 * -0.019||-||0.327 * 1.0032|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was €352 Mil.|
Revenue was 473.536090835 + 382.595034911 + 354.526122149 + 311.285610991 = €1,522 Mil.
Gross Profit was 284.469586375 + 225.712179984 + 205.995584989 + 175.55242227 = €892 Mil.
Total Current Assets was €2,314 Mil.
Total Assets was €3,145 Mil.
Property, Plant and Equipment(Net PPE) was €261 Mil.
Depreciation, Depletion and Amortization(DDA) was €72 Mil.
Selling, General & Admin. Expense(SGA) was €390 Mil.
Total Current Liabilities was €472 Mil.
Long-Term Debt was €1,006 Mil.
Net Income was 122.702351987 + 88.0504266874 + 71.0294334069 + 50.8329718004 = €333 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 131.161394972 + 99.1768813033 + 78.2428256071 + 83.6984815618 = €392 Mil.
|Accounts Receivable was €314 Mil.
Revenue was 412.134110787 + 342.559550562 + 342.012888552 + 332.307335907 = €1,429 Mil.
Gross Profit was 245.231049563 + 199.062921348 + 199.231235785 + 197.505791506 = €841 Mil.
Total Current Assets was €1,863 Mil.
Total Assets was €2,611 Mil.
Property, Plant and Equipment(Net PPE) was €237 Mil.
Depreciation, Depletion and Amortization(DDA) was €60 Mil.
Selling, General & Admin. Expense(SGA) was €370 Mil.
Total Current Liabilities was €355 Mil.
Long-Term Debt was €867 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)|
|=||(351.675587997 / 1521.94285889)||/||(314.129008746 / 1429.01388581)|
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)|
|=||(225.712179984 / 1429.01388581)||/||(284.469586375 / 1521.94285889)|
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 - (2314.46553122 + 260.813463098) / 3145.12084347)||/||(1 - (1863.15962099 + 236.83090379) / 2611.24562682)|
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))|
|=||(59.8625329321 / (59.8625329321 + 236.83090379))||/||(71.7275094713 / (71.7275094713 + 260.813463098))|
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)|
|=||(390.45434927 / 1521.94285889)||/||(370.485989631 / 1429.01388581)|
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)|
|=||((1005.67721006 + 471.690997567) / 3145.12084347)||/||((867.346938776 + 355.344023324) / 2611.24562682)|
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|
|=||(332.615183882 - 0||-||392.279583444)||/||3145.12084347|
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 -2.50 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