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GuruFocus has detected 5 Warning Signs with GlaxoSmithKline PLC $GSK.
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GlaxoSmithKline PLC (NYSE:GSK)
Beneish M-Score
-2.74 (As of Today)

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.

GlaxoSmithKline PLC has a M-score of -2.95 suggests that the company is not a manipulator.

GSK' s Beneish M-Score Range Over the Past 10 Years
Min: -3.78   Max: -0.01
Current: -2.74

-3.78
-0.01

During the past 13 years, the highest Beneish M-Score of GlaxoSmithKline PLC was -0.01. The lowest was -3.78. And the median was -2.66.


Definition

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 GlaxoSmithKline PLC 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 * 0.9756+0.528 * 0.9452+0.404 * 1.05+0.892 * 1.0316+0.115 * 0.9746
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.87+4.679 * -0.0993-0.327 * 1.0595
=-2.95

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $5,762 Mil.
Revenue was 9470.66167291 + 9910.64388962 + 9278.40909091 + 8873.21937322 = $37,533 Mil.
Gross Profit was 6339.57553059 + 6592.6412615 + 6261.36363636 + 5834.75783476 = $25,028 Mil.
Total Current Assets was $20,863 Mil.
Total Assets was $73,759 Mil.
Property, Plant and Equipment(Net PPE) was $13,493 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,394 Mil.
Selling, General & Admin. Expense(SGA) was $12,603 Mil.
Total Current Liabilities was $23,722 Mil.
Long-Term Debt was $18,303 Mil.
Net Income was 320.848938826 + 1061.760841 + -617.897727273 + 401.709401709 = $1,166 Mil.
Non Operating Income was -39.950062422 + 7.88436268068 + -2.84090909091 + 0 = $-35 Mil.
Cash Flow from Operations was 3734.082397 + 2321.94480946 + 1755.68181818 + 716.524216524 = $8,528 Mil.
Accounts Receivable was $5,725 Mil.
Revenue was 9410.17964072 + 9397.2392638 + 9171.33956386 + 8403.58744395 = $36,382 Mil.
Gross Profit was 5606.28742515 + 6016.87116564 + 6048.28660436 + 5260.0896861 = $22,932 Mil.
Total Current Assets was $24,831 Mil.
Total Assets was $80,009 Mil.
Property, Plant and Equipment(Net PPE) was $14,473 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,492 Mil.
Selling, General & Admin. Expense(SGA) was $14,042 Mil.
Total Current Liabilities was $20,085 Mil.
Long-Term Debt was $22,940 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(5761.54806492 / 37532.9340267) / (5724.5508982 / 36382.3459123)
=0.15350647 / 0.15734419
=0.9756

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(22931.5348813 / 36382.3459123) / (25028.3382632 / 37532.9340267)
=0.63029292 / 0.66683671
=0.9452

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (20862.6716604 + 13493.133583) / 73759.051186) / (1 - (24830.8383234 + 14473.0538922) / 80008.9820359)
=0.53421574 / 0.5087565
=1.05

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=37532.9340267 / 36382.3459123
=1.0316

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))
=(2491.80423154 / (2491.80423154 + 14473.0538922)) / (2394.48583016 / (2394.48583016 + 13493.133583))
=0.14688035 / 0.15071395
=0.9746

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)
=(12602.6476949 / 37532.9340267) / (14041.7292831 / 36382.3459123)
=0.33577571 / 0.38594898
=0.87

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)
=((18303.3707865 + 23721.5980025) / 73759.051186) / ((22940.1197605 + 20085.3293413) / 80008.9820359)
=0.56976016 / 0.53775774
=1.0595

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1166.42145426 - -34.9066088322 - 8528.23324117) / 73759.051186
=-0.0993

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.

GlaxoSmithKline PLC has a M-score of -2.95 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

GlaxoSmithKline PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.28971.06360.88950.89160.79470.96010.96111.0331.03411.0352
GMI 1.01751.04650.99561.00991.00041.04591.03560.99181.08220.9446
AQI 1.03211.0251.17551.09350.9691.16480.93240.97391.22221.05
SGI 1.0050.78931.27270.96180.96311.0011.01760.82860.99470.9722
DEPI 1.05111.02430.790.91231.11910.98961.02840.9760.97631.0233
SGAI 0.96031.04771.07551.35970.7011.03180.96211.12031.07670.8702
LVGI 1.19231.14120.97931.04131.01351.03671.0081.03540.75031.0595
TATA -0.0237-0.0645-0.0581-0.1244-0.03870.0037-0.0492-0.05940.0941-0.0941
M-score -2.35-2.93-2.57-3.24-2.83-2.43-2.73-2.93-1.81-2.92

GlaxoSmithKline PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.05790.94851.04591.07781.16541.06341.01620.99731.01410.9756
GMI 1.0350.99041.01021.01731.03141.08191.0461.02721.00280.9452
AQI 0.8980.97391.06581.15181.21221.22221.10671.06321.02821.05
SGI 0.94940.90240.88970.90250.93380.96741.00441.01391.02241.0316
DEPI 2.32610.87651.0660.81680.70281.00370.7931.19881.09390.9746
SGAI 1.08041.1211.12981.14981.08031.07651.01760.91220.92140.87
LVGI 1.03441.03540.78480.76440.73160.75031.01861.09451.08781.0595
TATA -0.0303-0.06090.07850.08190.10350.0939-0.0393-0.0649-0.0864-0.0993
M-score -2.51-2.96-2.08-2.01-1.76-1.81-2.61-2.73-2.84-2.95
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