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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 -2.56.
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 * 1.0116||+||0.528 * 0.994||+||0.404 * 1.0123||+||0.892 * 0.9684||+||0.115 * 0.8568|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9938||+||4.679 * -0.0507||-||0.327 * 0.9499|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $671 Mil.|
Revenue was 1404 + 1433 + 1434 + 1481 = $5,752 Mil.
Gross Profit was 347 + 393 + 380 + 391 = $1,511 Mil.
Total Current Assets was $2,480 Mil.
Total Assets was $8,444 Mil.
Property, Plant and Equipment(Net PPE) was $2,068 Mil.
Depreciation, Depletion and Amortization(DDA) was $281 Mil.
Selling, General & Admin. Expense(SGA) was $383 Mil.
Total Current Liabilities was $2,230 Mil.
Long-Term Debt was $2,429 Mil.
Net Income was 90 + 166 + 88 + 136 = $480 Mil.
Non Operating Income was 14 + 41 + -41 + 11 = $25 Mil.
Cash Flow from Operations was 48 + 199 + 331 + 305 = $883 Mil.
|Accounts Receivable was $685 Mil.
Revenue was 1415 + 1493 + 1493 + 1539 = $5,940 Mil.
Gross Profit was 344 + 423 + 378 + 406 = $1,551 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 $398 Mil.
Total Current Liabilities was $2,327 Mil.
Long-Term Debt was $2,395 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)|
|=||(671 / 5752)||/||(685 / 5940)|
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)|
|=||(393 / 5940)||/||(347 / 5752)|
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 - (2480 + 2068) / 8444)||/||(1 - (1937 + 2487) / 8129)|
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))|
|=||(284 / (284 + 2487))||/||(281 / (281 + 2068))|
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)|
|=||(383 / 5752)||/||(398 / 5940)|
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)|
|=||((2429 + 2230) / 8444)||/||((2395 + 2327) / 8129)|
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|
|=||(480 - 25||-||883)||/||8444|
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 -2.73 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