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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 7 years, the highest Beneish M-Score of Groupon Inc was -2.23. The lowest was -3.50. And the median was -2.95.
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 Groupon 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 * 0.7161||+||0.528 * 1.0431||+||0.404 * 1.3525||+||0.892 * 1.0105||+||0.115 * 0.9738|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0687||+||4.679 * -0.1429||-||0.327 * 1.3049|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $69 Mil.|
Revenue was 756.03 + 731.971 + 917.17 + 713.595 = $3,119 Mil.
Gross Profit was 333.588 + 339.328 + 371.74 + 328.912 = $1,374 Mil.
Total Current Assets was $1,039 Mil.
Total Assets was $1,751 Mil.
Property, Plant and Equipment(Net PPE) was $185 Mil.
Depreciation, Depletion and Amortization(DDA) was $138 Mil.
Selling, General & Admin. Expense(SGA) was $1,499 Mil.
Total Current Liabilities was $1,077 Mil.
Long-Term Debt was $174 Mil.
Net Income was -54.904 + -49.119 + -46.528 + -27.615 = $-178 Mil.
Non Operating Income was -6.09 + 3.94 + -2.649 + -7.708 = $-13 Mil.
Cash Flow from Operations was -54.01 + -76.725 + 248.354 + -33.043 = $85 Mil.
|Accounts Receivable was $95 Mil.
Revenue was 738.395 + 750.356 + 883.228 + 714.269 = $3,086 Mil.
Gross Profit was 337.007 + 347.406 + 378.109 + 355.278 = $1,418 Mil.
Total Current Assets was $1,397 Mil.
Total Assets was $2,021 Mil.
Property, Plant and Equipment(Net PPE) was $173 Mil.
Depreciation, Depletion and Amortization(DDA) was $124 Mil.
Selling, General & Admin. Expense(SGA) was $1,388 Mil.
Total Current Liabilities was $1,089 Mil.
Long-Term Debt was $17 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)|
|=||(68.974 / 3118.766)||/||(95.311 / 3086.248)|
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)|
|=||(1417.8 / 3086.248)||/||(1373.568 / 3118.766)|
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 - (1039.159 + 184.742) / 1751.442)||/||(1 - (1397.367 + 173.426) / 2020.826)|
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))|
|=||(124.156 / (124.156 + 173.426))||/||(138.485 / (138.485 + 184.742))|
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)|
|=||(1498.933 / 3118.766)||/||(1387.919 / 3086.248)|
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)|
|=||((174.015 + 1077.122) / 1751.442)||/||((17.251 + 1088.993) / 2020.826)|
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|
|=||(-178.166 - -12.507||-||84.576)||/||1751.442|
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.
Groupon Inc has a M-score of -3.35 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
Groupon Inc Annual Data
Groupon Inc Quarterly Data