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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 -1.35. The lowest was -3.93. And the median was -2.68.
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 * 1.0507||+||0.528 * 0.9592||+||0.404 * 1.0043||+||0.892 * 0.9784||+||0.115 * 0.8337|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0613||+||4.679 * -0.0409||-||0.327 * 1.4748|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $661 Mil.|
Revenue was 1493 + 1493 + 1539 + 1458 = $5,983 Mil.
Gross Profit was 1082 + 1064 + 1100 + 1029 = $4,275 Mil.
Total Current Assets was $2,321 Mil.
Total Assets was $8,659 Mil.
Property, Plant and Equipment(Net PPE) was $2,634 Mil.
Depreciation, Depletion and Amortization(DDA) was $283 Mil.
Selling, General & Admin. Expense(SGA) was $3,113 Mil.
Total Current Liabilities was $2,450 Mil.
Long-Term Debt was $2,574 Mil.
Net Income was 234 + 109 + 153 + 137 = $633 Mil.
Non Operating Income was 28 + -20 + 12 + -27 = $-7 Mil.
Cash Flow from Operations was 317 + 251 + 277 + 149 = $994 Mil.
|Accounts Receivable was $643 Mil.
Revenue was 1506 + 1508 + 1562 + 1539 = $6,115 Mil.
Gross Profit was 1051 + 1049 + 1071 + 1020 = $4,191 Mil.
Total Current Assets was $1,996 Mil.
Total Assets was $8,762 Mil.
Property, Plant and Equipment(Net PPE) was $3,034 Mil.
Depreciation, Depletion and Amortization(DDA) was $267 Mil.
Selling, General & Admin. Expense(SGA) was $2,998 Mil.
Total Current Liabilities was $1,924 Mil.
Long-Term Debt was $1,523 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)|
|=||(661 / 5983)||/||(643 / 6115)|
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)|
|=||(1064 / 6115)||/||(1082 / 5983)|
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 - (2321 + 2634) / 8659)||/||(1 - (1996 + 3034) / 8762)|
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))|
|=||(267 / (267 + 3034))||/||(283 / (283 + 2634))|
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)|
|=||(3113 / 5983)||/||(2998 / 6115)|
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)|
|=||((2574 + 2450) / 8659)||/||((1523 + 1924) / 8762)|
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|
|=||(633 - -7||-||994)||/||8659|
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 -2.85 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