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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.
Frontline Ltd has a M-score of -4.29 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Frontline Ltd was 13.62. The lowest was -4.22. And the median was -2.44.
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 * 0.7601||+||0.528 * 0.7854||+||0.404 * 1.4321||+||0.892 * 1.0359||+||0.115 * 1.1115|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 8.7942||+||4.679 * -0.0721||-||0.327 * 1.044|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $37.5 Mil.|
Revenue was 143.571 + 116.762 + 168.863 + 125.903 = $555.1 Mil.
Gross Profit was 40.18 + 10.414 + 71.024 + 24.903 = $146.5 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 $126.6 Mil.
Selling, General & Admin. Expense(SGA) was $53.7 Mil.
Total Current Liabilities was $130.8 Mil.
Long-Term Debt was $1,178.8 Mil.
Net Income was -13.031 + -36.446 + -24.346 + -18.755 = $-92.6 Mil.
Non Operating Income was -11.801 + 6.386 + -1.479 + 4.323 = $-2.6 Mil.
Cash Flow from Operations was 6.231 + -3.112 + 34.085 + -28.648 = $8.6 Mil.
|Accounts Receivable was $47.6 Mil.
Revenue was 152.781 + 112.599 + 121.222 + 149.253 = $535.9 Mil.
Gross Profit was 36.165 + 6.867 + 14.199 + 53.855 = $111.1 Mil.
Total Current Assets was $392.0 Mil.
Total Assets was $1,688.2 Mil.
Property, Plant and Equipment(Net PPE) was $1,202.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $171.9 Mil.
Selling, General & Admin. Expense(SGA) was $5.9 Mil.
Total Current Liabilities was $186.6 Mil.
Long-Term Debt was $1,361.8 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)|
|=||(37.495 / 555.099)||/||(47.617 / 535.855)|
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)|
|=||(10.414 / 535.855)||/||(40.18 / 555.099)|
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 - (260.153 + 999.28) / 1367.605)||/||(1 - (392.03 + 1202.948) / 1688.221)|
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))|
|=||(171.868 / (171.868 + 1202.948))||/||(126.634 / (126.634 + 999.28))|
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)|
|=||(53.713 / 555.099)||/||(5.896 / 535.855)|
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)|
|=||((1178.79 + 130.772) / 1367.605)||/||((1361.782 + 186.621) / 1688.221)|
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|
|=||(-92.578 - -2.571||-||8.556)||/||1367.605|
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 -4.29 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