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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 -4.41. And the median was -2.57.
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 * 0.7578||+||0.404 * 1.7455||+||0.892 * 1.0793||+||0.115 * 1.1865|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0951||+||4.679 * -0.1967||-||0.327 * 1.0847|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $0.0 Mil.|
Revenue was 135.619 + 118.972 + 169.998 + 143.571 = $568.2 Mil.
Gross Profit was 33.472 + 23.752 + 66.245 + 30.71 = $154.2 Mil.
Total Current Assets was $257.8 Mil.
Total Assets was $1,038.0 Mil.
Property, Plant and Equipment(Net PPE) was $639.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $99.0 Mil.
Selling, General & Admin. Expense(SGA) was $38.3 Mil.
Total Current Liabilities was $324.4 Mil.
Long-Term Debt was $834.1 Mil.
Net Income was -59.647 + -78.23 + -12.085 + -13.031 = $-163.0 Mil.
Non Operating Income was -0.412 + 7.905 + 0.837 + -11.801 = $-3.5 Mil.
Cash Flow from Operations was 17.73 + -0.429 + 21.152 + 6.231 = $44.7 Mil.
|Accounts Receivable was $0.0 Mil.
Revenue was 126.494 + 121.222 + 125.903 + 152.781 = $526.4 Mil.
Gross Profit was 33.186 + 13.996 + 24.903 + 36.165 = $108.3 Mil.
Total Current Assets was $277.6 Mil.
Total Assets was $1,409.1 Mil.
Property, Plant and Equipment(Net PPE) was $1,021.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $193.3 Mil.
Selling, General & Admin. Expense(SGA) was $32.4 Mil.
Total Current Liabilities was $134.9 Mil.
Long-Term Debt was $1,315.0 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 / 568.16)||/||(0 / 526.4)|
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)|
|=||(23.752 / 526.4)||/||(33.472 / 568.16)|
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 - (257.833 + 639.058) / 1038.035)||/||(1 - (277.629 + 1021.741) / 1409.143)|
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))|
|=||(193.331 / (193.331 + 1021.741))||/||(98.969 / (98.969 + 639.058))|
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)|
|=||(38.285 / 568.16)||/||(32.392 / 526.4)|
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)|
|=||((834.12 + 324.364) / 1038.035)||/||((1315.032 + 134.886) / 1409.143)|
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|
|=||(-162.993 - -3.471||-||44.684)||/||1038.035|
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 -3.18 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