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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 Frontline Ltd was 23.67. The lowest was -3.62. 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 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 * 0.5205||+||0.528 * 0.9793||+||0.404 * 0.9509||+||0.892 * 1.6436||+||0.115 * 0.4183|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 2.1288||+||4.679 * -0.0547||-||0.327 * 0.9918|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $49.1 Mil.|
Revenue was 178.29 + 157.157 + 191.756 + 227.103 = $754.3 Mil.
Gross Profit was 73.516 + 74.286 + 109.434 + 148.068 = $405.3 Mil.
Total Current Assets was $383.6 Mil.
Total Assets was $2,966.3 Mil.
Property, Plant and Equipment(Net PPE) was $2,322.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $140.6 Mil.
Selling, General & Admin. Expense(SGA) was $37.0 Mil.
Total Current Liabilities was $182.7 Mil.
Long-Term Debt was $1,280.7 Mil.
Net Income was 18.321 + 5.471 + 14.312 + 78.906 = $117.0 Mil.
Non Operating Income was 12.693 + 0.491 + -9.945 + -9.889 = $-6.7 Mil.
Cash Flow from Operations was 33.67 + 48.531 + 82.346 + 121.468 = $286.0 Mil.
|Accounts Receivable was $57.4 Mil.
Revenue was 154.023 + 107.456 + 103.937 + 93.518 = $458.9 Mil.
Gross Profit was 92.658 + 49.083 + 51.005 + 48.738 = $241.5 Mil.
Total Current Assets was $467.5 Mil.
Total Assets was $2,883.5 Mil.
Property, Plant and Equipment(Net PPE) was $2,149.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $52.6 Mil.
Selling, General & Admin. Expense(SGA) was $10.6 Mil.
Total Current Liabilities was $242.0 Mil.
Long-Term Debt was $1,192.2 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)|
|=||(49.079 / 754.306)||/||(57.367 / 458.934)|
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)|
|=||(241.484 / 458.934)||/||(405.304 / 754.306)|
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 - (383.626 + 2322.152) / 2966.317)||/||(1 - (467.465 + 2149.657) / 2883.468)|
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))|
|=||(52.607 / (52.607 + 2149.657))||/||(140.639 / (140.639 + 2322.152))|
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)|
|=||(37.026 / 754.306)||/||(10.582 / 458.934)|
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)|
|=||((1280.687 + 182.749) / 2966.317)||/||((1192.248 + 242.037) / 2883.468)|
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|
|=||(117.01 - -6.65||-||286.015)||/||2966.317|
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 -2.89 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
Frontline Ltd Annual Data
Frontline Ltd Quarterly Data