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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 -3.79. And the median was -2.86.
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 * 1.4799||+||0.528 * 0.6093||+||0.404 * 1.3994||+||0.892 * 1.0822||+||0.115 * 0.7905|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1917||+||4.679 * -0.1783||-||0.327 * 0.9994|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $18.9 Mil.|
Revenue was 135.099 + 135.619 + 118.972 + 169.998 = $559.7 Mil.
Gross Profit was 52.55 + 41.1 + 23.752 + 66.245 = $183.6 Mil.
Total Current Assets was $233.2 Mil.
Total Assets was $962.2 Mil.
Property, Plant and Equipment(Net PPE) was $622.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $80.8 Mil.
Selling, General & Admin. Expense(SGA) was $40.8 Mil.
Total Current Liabilities was $328.6 Mil.
Long-Term Debt was $592.2 Mil.
Net Income was -12.976 + -59.647 + -78.23 + -12.085 = $-162.9 Mil.
Non Operating Income was -55.153 + -0.412 + 7.905 + 0.837 = $-46.8 Mil.
Cash Flow from Operations was 16.96 + 17.73 + -0.429 + 21.152 = $55.4 Mil.
|Accounts Receivable was $11.8 Mil.
Revenue was 143.571 + 126.494 + 121.222 + 125.903 = $517.2 Mil.
Gross Profit was 40.18 + 24.322 + 13.996 + 24.903 = $103.4 Mil.
Total Current Assets was $260.2 Mil.
Total Assets was $1,367.6 Mil.
Property, Plant and Equipment(Net PPE) was $999.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $99.8 Mil.
Selling, General & Admin. Expense(SGA) was $31.6 Mil.
Total Current Liabilities was $130.8 Mil.
Long-Term Debt was $1,178.8 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)|
|=||(18.943 / 559.688)||/||(11.828 / 517.19)|
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)|
|=||(41.1 / 517.19)||/||(52.55 / 559.688)|
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 - (233.243 + 622.438) / 962.179)||/||(1 - (260.153 + 999.28) / 1367.605)|
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))|
|=||(99.823 / (99.823 + 999.28))||/||(80.794 / (80.794 + 622.438))|
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)|
|=||(40.787 / 559.688)||/||(31.628 / 517.19)|
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)|
|=||((592.192 + 328.588) / 962.179)||/||((1178.79 + 130.772) / 1367.605)|
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|
|=||(-162.938 - -46.823||-||55.413)||/||962.179|
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 -2.90 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