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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 Hospira Inc was -1.04. The lowest was -3.09. And the median was -2.72.
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 Hospira 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 * 0.8799||+||0.528 * 0.7768||+||0.404 * 0.985||+||0.892 * 1.1006||+||0.115 * 1.1536|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9994||+||4.679 * -0.0385||-||0.327 * 0.9821|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $610 Mil.|
Revenue was 1150.6 + 1135.8 + 1050.8 + 1084.4 = $4,422 Mil.
Gross Profit was 431.3 + 400 + 369.6 + 321.6 = $1,523 Mil.
Total Current Assets was $2,759 Mil.
Total Assets was $6,493 Mil.
Property, Plant and Equipment(Net PPE) was $1,788 Mil.
Depreciation, Depletion and Amortization(DDA) was $260 Mil.
Selling, General & Admin. Expense(SGA) was $808 Mil.
Total Current Liabilities was $1,170 Mil.
Long-Term Debt was $1,749 Mil.
Net Income was 158.6 + 70.9 + 67.9 + 33.5 = $331 Mil.
Non Operating Income was -4.3 + 0.8 + 2 + -7.6 = $-9 Mil.
Cash Flow from Operations was 158.8 + 157.2 + 18.3 + 255.9 = $590 Mil.
|Accounts Receivable was $630 Mil.
Revenue was 1008.2 + 1026.2 + 884 + 1098.9 = $4,017 Mil.
Gross Profit was 290.2 + 318.7 + 150.1 + 315.6 = $1,075 Mil.
Total Current Assets was $2,710 Mil.
Total Assets was $6,032 Mil.
Property, Plant and Equipment(Net PPE) was $1,487 Mil.
Depreciation, Depletion and Amortization(DDA) was $256 Mil.
Selling, General & Admin. Expense(SGA) was $734 Mil.
Total Current Liabilities was $1,014 Mil.
Long-Term Debt was $1,747 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)|
|=||(610.2 / 4421.6)||/||(630.1 / 4017.3)|
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)|
|=||(400 / 4017.3)||/||(431.3 / 4421.6)|
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 - (2759.2 + 1787.7) / 6493.1)||/||(1 - (2709.7 + 1487) / 6032.2)|
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))|
|=||(255.5 / (255.5 + 1487))||/||(260.3 / (260.3 + 1787.7))|
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)|
|=||(807.8 / 4421.6)||/||(734.4 / 4017.3)|
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)|
|=||((1749.2 + 1169.9) / 6493.1)||/||((1747.4 + 1014) / 6032.2)|
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|
|=||(330.9 - -9.1||-||590.2)||/||6493.1|
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.
Hospira 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
Hospira Inc Annual Data
Hospira Inc Quarterly Data