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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 -2.98. And the median was -2.60.
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 * 1.0309||+||0.528 * 1.0115||+||0.404 * 0.9283||+||0.892 * 1.1919||+||0.115 * 0.9756|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9334||+||4.679 * -0.081||-||0.327 * 0.8055|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $11,979 Mil.|
Revenue was 22451 + 21500 + 20257 + 21329 = $85,537 Mil.
Gross Profit was 13752 + 13370 + 12609 + 13141 = $52,872 Mil.
Total Current Assets was $98,546 Mil.
Total Assets was $159,948 Mil.
Property, Plant and Equipment(Net PPE) was $32,753 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,861 Mil.
Selling, General & Admin. Expense(SGA) was $16,579 Mil.
Total Current Liabilities was $14,323 Mil.
Long-Term Debt was $3,938 Mil.
Net Income was 5061 + 4877 + 4207 + 4923 = $19,068 Mil.
Non Operating Income was -11 + -124 + -453 + -428 = $-1,016 Mil.
Cash Flow from Operations was 9845 + 9120 + 7658 + 6415 = $33,038 Mil.
|Accounts Receivable was $9,749 Mil.
Revenue was 18675 + 17727 + 17258 + 18103 = $71,763 Mil.
Gross Profit was 11638 + 11144 + 10902 + 11182 = $44,866 Mil.
Total Current Assets was $88,103 Mil.
Total Assets was $144,281 Mil.
Property, Plant and Equipment(Net PPE) was $28,338 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,926 Mil.
Selling, General & Admin. Expense(SGA) was $14,902 Mil.
Total Current Liabilities was $18,457 Mil.
Long-Term Debt was $1,994 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)|
|=||(11979 / 85537)||/||(9749 / 71763)|
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)|
|=||(44866 / 71763)||/||(52872 / 85537)|
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 - (98546 + 32753) / 159948)||/||(1 - (88103 + 28338) / 144281)|
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))|
|=||(4926 / (4926 + 28338))||/||(5861 / (5861 + 32753))|
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)|
|=||(16579 / 85537)||/||(14902 / 71763)|
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)|
|=||((3938 + 14323) / 159948)||/||((1994 + 18457) / 144281)|
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|
|=||(19068 - -1016||-||33038)||/||159948|
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 -2.61 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