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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 LKQ Corp was -1.48. The lowest was -2.74. And the median was -2.23.
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 LKQ Corp 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 * 1.3482||+||0.528 * 1.0087||+||0.404 * 1.01||+||0.892 * 1.1333||+||0.115 * 1.2697|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9905||+||4.679 * -0.0186||-||0.327 * 1.2858|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $995 Mil.|
Revenue was 2450.693 + 1921.476 + 1748.919 + 1831.732 = $7,953 Mil.
Gross Profit was 921.947 + 760.437 + 697.327 + 712.779 = $3,092 Mil.
Total Current Assets was $3,298 Mil.
Total Assets was $8,186 Mil.
Property, Plant and Equipment(Net PPE) was $1,055 Mil.
Depreciation, Depletion and Amortization(DDA) was $157 Mil.
Selling, General & Admin. Expense(SGA) was $2,163 Mil.
Total Current Liabilities was $1,168 Mil.
Long-Term Debt was $3,275 Mil.
Net Income was 140.737 + 107.732 + 95.06 + 101.346 = $445 Mil.
Non Operating Income was -1.339 + -5.419 + -1.366 + 2.928 = $-5 Mil.
Cash Flow from Operations was 225.023 + 130.207 + 38.514 + 208.624 = $602 Mil.
|Accounts Receivable was $651 Mil.
Revenue was 1838.07 + 1773.912 + 1684.131 + 1721.024 = $7,017 Mil.
Gross Profit was 723.944 + 699.479 + 664.559 + 664.411 = $2,752 Mil.
Total Current Assets was $2,373 Mil.
Total Assets was $5,635 Mil.
Property, Plant and Equipment(Net PPE) was $650 Mil.
Depreciation, Depletion and Amortization(DDA) was $128 Mil.
Selling, General & Admin. Expense(SGA) was $1,927 Mil.
Total Current Liabilities was $726 Mil.
Long-Term Debt was $1,652 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)|
|=||(995.153 / 7952.82)||/||(651.271 / 7017.137)|
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)|
|=||(2752.393 / 7017.137)||/||(3092.49 / 7952.82)|
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 - (3298.428 + 1055.046) / 8185.944)||/||(1 - (2372.621 + 650.053) / 5634.542)|
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))|
|=||(128.258 / (128.258 + 650.053))||/||(157.36 / (157.36 + 1055.046))|
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)|
|=||(2162.865 / 7952.82)||/||(1926.693 / 7017.137)|
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)|
|=||((3274.629 + 1168.382) / 8185.944)||/||((1652.064 + 726.365) / 5634.542)|
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|
|=||(444.875 - -5.196||-||602.368)||/||8185.944|
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.
LKQ Corp has a M-score of -2.18 signals that the company is likely to 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
LKQ Corp Annual Data
LKQ Corp Quarterly Data