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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 Invesco Ltd was -1.96. The lowest was -2.86. And the median was -2.51.
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 Invesco Ltd 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 * 1.1414||+||0.528 * 1||+||0.404 * 0.9947||+||0.892 * 1.1082||+||0.115 * 1.1077|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9909||+||4.679 * -0.0155||-||0.327 * 1.027|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $707 Mil.|
Revenue was 1276.7 + 1311 + 1289.9 + 1269.5 = $5,147 Mil.
Gross Profit was 1276.7 + 1311 + 1289.9 + 1269.5 = $5,147 Mil.
Total Current Assets was $6,471 Mil.
Total Assets was $20,463 Mil.
Property, Plant and Equipment(Net PPE) was $403 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General & Admin. Expense(SGA) was $3,870 Mil.
Total Current Liabilities was $9,283 Mil.
Long-Term Debt was $1,589 Mil.
Net Income was 269.8 + 256 + 274.5 + 187.8 = $988 Mil.
Non Operating Income was -29 + 17.1 + 66.2 + 51.3 = $106 Mil.
Cash Flow from Operations was 183 + 467.1 + 769.5 + -219.2 = $1,200 Mil.
|Accounts Receivable was $559 Mil.
Revenue was 1225.1 + 1171.8 + 1135.5 + 1112.2 = $4,645 Mil.
Gross Profit was 1225.1 + 1171.8 + 1135.5 + 1112.2 = $4,645 Mil.
Total Current Assets was $6,054 Mil.
Total Assets was $19,271 Mil.
Property, Plant and Equipment(Net PPE) was $351 Mil.
Depreciation, Depletion and Amortization(DDA) was $88 Mil.
Selling, General & Admin. Expense(SGA) was $3,524 Mil.
Total Current Liabilities was $8,381 Mil.
Long-Term Debt was $1,589 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)|
|=||(707.2 / 5147.1)||/||(559.1 / 4644.6)|
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)|
|=||(1311 / 4644.6)||/||(1276.7 / 5147.1)|
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 - (6471 + 402.6) / 20462.5)||/||(1 - (6054 + 350.8) / 19270.5)|
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))|
|=||(88.4 / (88.4 + 350.8))||/||(89.4 / (89.4 + 402.6))|
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)|
|=||(3870.2 / 5147.1)||/||(3524.4 / 4644.6)|
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)|
|=||((1589.3 + 9283.1) / 20462.5)||/||((1588.6 + 8381) / 19270.5)|
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|
|=||(988.1 - 105.6||-||1200.4)||/||20462.5|
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.
Invesco Ltd has a M-score of -2.32 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
Invesco Ltd Annual Data
Invesco Ltd Quarterly Data