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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 * 0.8357||+||0.528 * 0.8046||+||0.404 * 1.0441||+||0.892 * 1.0833||+||0.115 * 1.1903|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0607||+||4.679 * -0.0372||-||0.327 * 0.9438|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $588 Mil.|
Revenue was 1183.6 + 1174.9 + 1126.5 + 1150.6 = $4,636 Mil.
Gross Profit was 519.4 + 523.5 + 385.6 + 431.3 = $1,860 Mil.
Total Current Assets was $3,010 Mil.
Total Assets was $6,784 Mil.
Property, Plant and Equipment(Net PPE) was $1,909 Mil.
Depreciation, Depletion and Amortization(DDA) was $246 Mil.
Selling, General & Admin. Expense(SGA) was $879 Mil.
Total Current Liabilities was $1,193 Mil.
Long-Term Debt was $1,748 Mil.
Net Income was 145.1 + 75.6 + 35.8 + 158.6 = $415 Mil.
Non Operating Income was 2.6 + 3.5 + -6.3 + -4.3 = $-5 Mil.
Cash Flow from Operations was 286.5 + -100.3 + 327.1 + 158.8 = $672 Mil.
|Accounts Receivable was $650 Mil.
Revenue was 1135.8 + 1050.8 + 1084.4 + 1008.2 = $4,279 Mil.
Gross Profit was 400 + 369.6 + 321.6 + 290.2 = $1,381 Mil.
Total Current Assets was $3,061 Mil.
Total Assets was $6,402 Mil.
Property, Plant and Equipment(Net PPE) was $1,656 Mil.
Depreciation, Depletion and Amortization(DDA) was $260 Mil.
Selling, General & Admin. Expense(SGA) was $765 Mil.
Total Current Liabilities was $1,192 Mil.
Long-Term Debt was $1,749 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)|
|=||(588 / 4635.6)||/||(649.5 / 4279.2)|
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)|
|=||(523.5 / 4279.2)||/||(519.4 / 4635.6)|
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 - (3009.7 + 1909.3) / 6783.8)||/||(1 - (3060.7 + 1655.6) / 6401.8)|
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))|
|=||(260.3 / (260.3 + 1655.6))||/||(246 / (246 + 1909.3))|
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)|
|=||(878.7 / 4635.6)||/||(764.7 / 4279.2)|
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)|
|=||((1748.1 + 1192.7) / 6783.8)||/||((1748.9 + 1191.5) / 6401.8)|
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|
|=||(415.1 - -4.5||-||672.1)||/||6783.8|
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 -2.79 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