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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 Alphabet Inc was -0.06. The lowest was -2.89. 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 Alphabet Inc 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 * 1.0162||+||0.528 * 1.0224||+||0.404 * 0.8656||+||0.892 * 1.2038||+||0.115 * 0.9764|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9558||+||4.679 * -0.0949||-||0.327 * 0.855|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $14,137 Mil.|
Revenue was 26064 + 22451 + 21500 + 20257 = $90,272 Mil.
Gross Profit was 15403 + 13752 + 13370 + 12609 = $55,134 Mil.
Total Current Assets was $105,408 Mil.
Total Assets was $167,497 Mil.
Property, Plant and Equipment(Net PPE) was $34,234 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,144 Mil.
Selling, General & Admin. Expense(SGA) was $17,470 Mil.
Total Current Liabilities was $16,756 Mil.
Long-Term Debt was $3,935 Mil.
Net Income was 5333 + 5061 + 4877 + 4207 = $19,478 Mil.
Non Operating Income was -74 + -11 + -124 + -453 = $-662 Mil.
Cash Flow from Operations was 9413 + 9845 + 9120 + 7658 = $36,036 Mil.
|Accounts Receivable was $11,556 Mil.
Revenue was 21329 + 18675 + 17727 + 17258 = $74,989 Mil.
Gross Profit was 13141 + 11638 + 11144 + 10902 = $46,825 Mil.
Total Current Assets was $90,114 Mil.
Total Assets was $147,461 Mil.
Property, Plant and Equipment(Net PPE) was $29,016 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,063 Mil.
Selling, General & Admin. Expense(SGA) was $15,183 Mil.
Total Current Liabilities was $19,310 Mil.
Long-Term Debt was $1,995 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)|
|=||(14137 / 90272)||/||(11556 / 74989)|
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)|
|=||(46825 / 74989)||/||(55134 / 90272)|
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 - (105408 + 34234) / 167497)||/||(1 - (90114 + 29016) / 147461)|
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))|
|=||(5063 / (5063 + 29016))||/||(6144 / (6144 + 34234))|
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)|
|=||(17470 / 90272)||/||(15183 / 74989)|
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)|
|=||((3935 + 16756) / 167497)||/||((1995 + 19310) / 147461)|
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|
|=||(19478 - -662||-||36036)||/||167497|
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.
Alphabet Inc has a M-score of -2.72 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
Alphabet Inc Annual Data
Alphabet Inc Quarterly Data