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Frontline Ltd (NYSE:FRO)
Beneish M-Score
2.09 (As of Today)

Warning Sign:

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.

Frontline Ltd has a M-score of 2.09 signals that the company is a manipulator.

FRO' s Beneish M-Score Range Over the Past 10 Years
Min: -4.35   Max: 23.67
Current: 2.09

-4.35
23.67

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.


Definition

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
=2.09

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

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

Measured as the ratio of days’ sales in receivables in year t to year t-1.

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)
=0 / 0
=1

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(106.24 / 122.148) / (424.446 / 730.039)
=0.86976455 / 0.58140182
=1.496

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

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)
=0.09790517 / 0.10759745
=0.9099

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=730.039 / 122.148
=5.9767

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))
=-0.02503563 / 0.05325104
=-0.4701

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)
=0.04595097 / -0.16001899
=-0.2872

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)
=0.52080309 / 0.73315875
=0.7104

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(157.247 - -29.049 - 339.393) / 2922.859
=-0.0524

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.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Frontline Ltd Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.78851.09510.63941.48871.20961.31570.64452.15550.62372.2687
GMI 1.08151.07850.89361.37390.98471.65471.08510.94310.76470.6956
AQI 3.68521.7870.57070.50181.27041.33041.231.43214.93170.2394
SGI 1.04170.911.5840.49691.04390.62090.79940.23151.8061.8978
DEPI 0.96750.77731.09350.89671.19470.49761.49923.55070.86391.1486
SGAI 1.46591.24486.35210.34970.93970.92551.18190.49060.71071.1281
LVGI 1.00131.1970.93680.96911.00661.1021.04281.0440.29671.7529
TATA -0.0711-0.0293-0.0302-0.0645-0.0385-0.3233-0.09210.02260.0267-0.0134
M-score -1.93-2.38-3.55-2.67-2.30-3.64-3.27-1.49-0.25-1.29

Frontline Ltd Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 110.62371112.268710.39591
GMI 0.31720.33130.76471.03120.7710.65520.69560.74661.11391.496
AQI 1.26921.74554.93171.4481.0870.79130.23940.78291.4920.9099
SGI 0.34290.35121.8060.92890.85530.66071.89783.58354.52625.9767
DEPI 4.37542.7250.86390.89222.5806-1.36471.14860.73910.1704-0.4701
SGAI 0.65590.92370.7107-0.6792-1.8212-2.81531.1281-1.976-0.5054-0.2872
LVGI 1.04891.08470.29671.00540.60370.65691.75290.50760.8180.7104
TATA 0.009-0.02510.01410.03310.11690.2494-0.0134-0.0112-0.0259-0.0524
M-score -2.84-3.04-0.31-1.92-1.35-1.39-1.290.190.472.09
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