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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 Starwood Hotels & Resorts Worldwide Inc was -0.01. The lowest was -5.17. And the median was -2.74.
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 Starwood Hotels & Resorts Worldwide 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 * 1.1133||+||0.528 * 0.9701||+||0.404 * 1.0525||+||0.892 * 0.9844||+||0.115 * 0.8313|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0385||+||4.679 * -0.0433||-||0.327 * 1.4983|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $685 Mil.|
Revenue was 1415 + 1493 + 1493 + 1539 = $5,940 Mil.
Gross Profit was 1016 + 1082 + 1064 + 1100 = $4,262 Mil.
Total Current Assets was $1,937 Mil.
Total Assets was $8,129 Mil.
Property, Plant and Equipment(Net PPE) was $2,487 Mil.
Depreciation, Depletion and Amortization(DDA) was $284 Mil.
Selling, General & Admin. Expense(SGA) was $3,109 Mil.
Total Current Liabilities was $2,327 Mil.
Long-Term Debt was $2,395 Mil.
Net Income was 99 + 234 + 109 + 153 = $595 Mil.
Non Operating Income was 29 + 28 + -20 + 12 = $49 Mil.
Cash Flow from Operations was 55 + 317 + 251 + 275 = $898 Mil.
|Accounts Receivable was $625 Mil.
Revenue was 1458 + 1506 + 1508 + 1562 = $6,034 Mil.
Gross Profit was 1029 + 1051 + 1049 + 1071 = $4,200 Mil.
Total Current Assets was $2,063 Mil.
Total Assets was $8,752 Mil.
Property, Plant and Equipment(Net PPE) was $2,899 Mil.
Depreciation, Depletion and Amortization(DDA) was $270 Mil.
Selling, General & Admin. Expense(SGA) was $3,041 Mil.
Total Current Liabilities was $1,893 Mil.
Long-Term Debt was $1,500 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)|
|=||(685 / 5940)||/||(625 / 6034)|
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)|
|=||(1082 / 6034)||/||(1016 / 5940)|
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 - (1937 + 2487) / 8129)||/||(1 - (2063 + 2899) / 8752)|
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))|
|=||(270 / (270 + 2899))||/||(284 / (284 + 2487))|
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)|
|=||(3109 / 5940)||/||(3041 / 6034)|
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)|
|=||((2395 + 2327) / 8129)||/||((1500 + 1893) / 8752)|
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|
|=||(595 - 49||-||898)||/||8129|
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.
Starwood Hotels & Resorts Worldwide Inc has a M-score of -2.78 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
Starwood Hotels & Resorts Worldwide Inc Annual Data
Starwood Hotels & Resorts Worldwide Inc Quarterly Data