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Beneish M-Score 2.09 higher than -2.22, which implies that it might have manipulated its financial results.
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 Frontline Ltd was 23.67. The lowest was -4.35. And the median was -2.41.
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 Frontline Ltd 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||+||0.528 * 1.496||+||0.404 * 0.9099||+||0.892 * 5.9767||+||0.115 * -0.4701|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * -0.2872||+||4.679 * -0.0524||-||0.327 * 0.7104|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $0.0 Mil.|
Revenue was 157.157 + 191.756 + 227.103 + 154.023 = $730.0 Mil.
Gross Profit was 74.286 + 109.434 + 148.068 + 92.658 = $424.4 Mil.
Total Current Assets was $287.1 Mil.
Total Assets was $2,922.9 Mil.
Property, Plant and Equipment(Net PPE) was $2,349.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $132.2 Mil.
Selling, General & Admin. Expense(SGA) was $33.5 Mil.
Total Current Liabilities was $193.8 Mil.
Long-Term Debt was $1,328.5 Mil.
Net Income was 5.471 + 14.312 + 78.906 + 58.558 = $157.2 Mil.
Non Operating Income was 0.491 + -9.945 + -9.889 + -9.706 = $-29.0 Mil.
Cash Flow from Operations was 48.531 + 82.346 + 121.468 + 87.048 = $339.4 Mil.
|Accounts Receivable was $0.0 Mil.
Revenue was 107.456 + 103.937 + 93.518 + -182.763 = $122.1 Mil.
Gross Profit was 49.083 + 51.005 + 48.738 + -42.586 = $106.2 Mil.
Total Current Assets was $217.3 Mil.
Total Assets was $851.2 Mil.
Property, Plant and Equipment(Net PPE) was $542.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $-13.2 Mil.
Selling, General & Admin. Expense(SGA) was $-19.5 Mil.
Total Current Liabilities was $159.7 Mil.
Long-Term Debt was $464.3 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)|
|=||(0 / 730.039)||/||(0 / 122.148)|
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)|
|=||(106.24 / 122.148)||/||(424.446 / 730.039)|
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 - (287.133 + 2349.563) / 2922.859)||/||(1 - (217.322 + 542.25) / 851.154)|
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))|
|=||(-13.244 / (-13.244 + 542.25))||/||(132.154 / (132.154 + 2349.563))|
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)|
|=||(33.546 / 730.039)||/||(-19.546 / 122.148)|
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)|
|=||((1328.481 + 193.753) / 2922.859)||/||((464.336 + 159.695) / 851.154)|
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|
|=||(157.247 - -29.049||-||339.393)||/||2922.859|
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.
Frontline Ltd has a M-score of 2.09 signals that the company is likely to 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
Frontline Ltd Annual Data
Frontline Ltd Quarterly Data