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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 -3.51. And the median was -2.99.
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 * 0.9603||+||0.528 * 1.0373||+||0.404 * 1.2113||+||0.892 * 1.013||+||0.115 * 0.9046|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0089||+||4.679 * -0.1565||-||0.327 * 1.1313|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $74 Mil.|
Revenue was 720.468 + 756.03 + 731.971 + 917.17 = $3,126 Mil.
Gross Profit was 314.117 + 333.588 + 339.328 + 371.74 = $1,359 Mil.
Total Current Assets was $909 Mil.
Total Assets was $1,614 Mil.
Property, Plant and Equipment(Net PPE) was $180 Mil.
Depreciation, Depletion and Amortization(DDA) was $136 Mil.
Selling, General & Admin. Expense(SGA) was $1,453 Mil.
Total Current Liabilities was $984 Mil.
Long-Term Debt was $200 Mil.
Net Income was -37.976 + -54.904 + -49.119 + -46.528 = $-189 Mil.
Non Operating Income was -1.843 + -6.09 + 3.94 + -2.649 = $-7 Mil.
Cash Flow from Operations was -40.822 + -54.01 + -76.725 + 242.156 = $71 Mil.
|Accounts Receivable was $76 Mil.
Revenue was 713.595 + 738.395 + 750.356 + 883.228 = $3,086 Mil.
Gross Profit was 328.912 + 337.007 + 347.406 + 378.109 = $1,391 Mil.
Total Current Assets was $1,283 Mil.
Total Assets was $2,031 Mil.
Property, Plant and Equipment(Net PPE) was $203 Mil.
Depreciation, Depletion and Amortization(DDA) was $129 Mil.
Selling, General & Admin. Expense(SGA) was $1,421 Mil.
Total Current Liabilities was $1,283 Mil.
Long-Term Debt was $34 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)|
|=||(74.047 / 3125.639)||/||(76.121 / 3085.574)|
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)|
|=||(1391.434 / 3085.574)||/||(1358.773 / 3125.639)|
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 - (909.074 + 179.987) / 1613.541)||/||(1 - (1283.015 + 202.714) / 2030.641)|
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))|
|=||(129.329 / (129.329 + 202.714))||/||(136.103 / (136.103 + 179.987))|
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)|
|=||(1452.51 / 3125.639)||/||(1421.221 / 3085.574)|
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)|
|=||((199.713 + 984.468) / 1613.541)||/||((34.398 + 1282.928) / 2030.641)|
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|
|=||(-188.527 - -6.642||-||70.599)||/||1613.541|
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 -3.19 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