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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 -2.93. And the median was -2.64.
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 * 1.0837||+||0.528 * 0.999||+||0.404 * 1.0826||+||0.892 * 0.9632||+||0.115 * 0.8399|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.002||+||4.679 * -0.0533||-||0.327 * 0.941|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $690 Mil.|
Revenue was 1433 + 1434 + 1481 + 1415 = $5,763 Mil.
Gross Profit was 393 + 380 + 391 + 344 = $1,508 Mil.
Total Current Assets was $2,295 Mil.
Total Assets was $8,268 Mil.
Property, Plant and Equipment(Net PPE) was $2,144 Mil.
Depreciation, Depletion and Amortization(DDA) was $280 Mil.
Selling, General & Admin. Expense(SGA) was $388 Mil.
Total Current Liabilities was $2,236 Mil.
Long-Term Debt was $2,278 Mil.
Net Income was 166 + 88 + 136 + 99 = $489 Mil.
Non Operating Income was 41 + -41 + 11 + 29 = $40 Mil.
Cash Flow from Operations was 199 + 331 + 305 + 55 = $890 Mil.
|Accounts Receivable was $661 Mil.
Revenue was 1493 + 1493 + 1539 + 1458 = $5,983 Mil.
Gross Profit was 423 + 378 + 406 + 357 = $1,564 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 $402 Mil.
Total Current Liabilities was $2,450 Mil.
Long-Term Debt was $2,574 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)|
|=||(690 / 5763)||/||(661 / 5983)|
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)|
|=||(380 / 5983)||/||(393 / 5763)|
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 - (2295 + 2144) / 8268)||/||(1 - (2321 + 2634) / 8659)|
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))|
|=||(283 / (283 + 2634))||/||(280 / (280 + 2144))|
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)|
|=||(388 / 5763)||/||(402 / 5983)|
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)|
|=||((2278 + 2236) / 8268)||/||((2574 + 2450) / 8659)|
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|
|=||(489 - 40||-||890)||/||8268|
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 -2.65 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