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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 -0.97. The lowest was -5.17. And the median was -2.57.
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 * 0.9545||+||0.528 * 0.9719||+||0.404 * 0.9885||+||0.892 * 0.9778||+||0.115 * 0.7061|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0314||+||4.679 * -0.0821||-||0.327 * 1.1523|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $630 Mil.|
Revenue was 1246 + 1404 + 1433 + 1434 = $5,517 Mil.
Gross Profit was 1030 + 347 + 393 + 380 = $2,150 Mil.
Total Current Assets was $2,353 Mil.
Total Assets was $6,922 Mil.
Property, Plant and Equipment(Net PPE) was $1,478 Mil.
Depreciation, Depletion and Amortization(DDA) was $273 Mil.
Selling, General & Admin. Expense(SGA) was $1,057 Mil.
Total Current Liabilities was $1,978 Mil.
Long-Term Debt was $2,380 Mil.
Net Income was -263 + 90 + 166 + 88 = $81 Mil.
Non Operating Income was -105 + 14 + 41 + -41 = $-91 Mil.
Cash Flow from Operations was 162 + 48 + 199 + 331 = $740 Mil.
|Accounts Receivable was $675 Mil.
Revenue was 1241 + 1415 + 1493 + 1493 = $5,642 Mil.
Gross Profit was 992 + 344 + 423 + 378 = $2,137 Mil.
Total Current Assets was $2,095 Mil.
Total Assets was $8,053 Mil.
Property, Plant and Equipment(Net PPE) was $2,320 Mil.
Depreciation, Depletion and Amortization(DDA) was $287 Mil.
Selling, General & Admin. Expense(SGA) was $1,048 Mil.
Total Current Liabilities was $2,408 Mil.
Long-Term Debt was $1,992 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)|
|=||(630 / 5517)||/||(675 / 5642)|
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)|
|=||(2137 / 5642)||/||(2150 / 5517)|
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 - (2353 + 1478) / 6922)||/||(1 - (2095 + 2320) / 8053)|
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))|
|=||(287 / (287 + 2320))||/||(273 / (273 + 1478))|
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)|
|=||(1057 / 5517)||/||(1048 / 5642)|
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)|
|=||((2380 + 1978) / 6922)||/||((1992 + 2408) / 8053)|
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|
|=||(81 - -91||-||740)||/||6922|
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 -3.03 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