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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 -2.88. And the median was -2.22.
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 * 1.0491||+||0.528 * 1.0321||+||0.404 * 0.9428||+||0.892 * 1.3238||+||0.115 * 0.8295|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9607||+||4.679 * -0.0056||-||0.327 * 1.0806|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $609 Mil.|
Revenue was 1721.024 + 1709.132 + 1625.777 + 1316.689 = $6,373 Mil.
Gross Profit was 664.411 + 671.059 + 651.884 + 545.673 = $2,533 Mil.
Total Current Assets was $2,346 Mil.
Total Assets was $5,535 Mil.
Property, Plant and Equipment(Net PPE) was $612 Mil.
Depreciation, Depletion and Amortization(DDA) was $115 Mil.
Selling, General & Admin. Expense(SGA) was $1,770 Mil.
Total Current Liabilities was $771 Mil.
Long-Term Debt was $1,825 Mil.
Net Income was 91.515 + 104.882 + 104.653 + 77.864 = $379 Mil.
Non Operating Income was 0.006 + 1.697 + 0.994 + -2.476 = $0 Mil.
Cash Flow from Operations was 170.438 + 55.195 + 97.009 + 87.127 = $410 Mil.
|Accounts Receivable was $439 Mil.
Revenue was 1298.094 + 1251.748 + 1195.997 + 1067.915 = $4,814 Mil.
Gross Profit was 517.907 + 509.873 + 501.949 + 445.121 = $1,975 Mil.
Total Current Assets was $1,676 Mil.
Total Assets was $4,361 Mil.
Property, Plant and Equipment(Net PPE) was $532 Mil.
Depreciation, Depletion and Amortization(DDA) was $80 Mil.
Selling, General & Admin. Expense(SGA) was $1,392 Mil.
Total Current Liabilities was $643 Mil.
Long-Term Debt was $1,251 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)|
|=||(609.434 / 6372.622)||/||(438.8 / 4813.754)|
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)|
|=||(671.059 / 4813.754)||/||(664.411 / 6372.622)|
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 - (2345.538 + 612.292) / 5534.578)||/||(1 - (1675.651 + 531.897) / 4361.059)|
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))|
|=||(80.459 / (80.459 + 531.897))||/||(115.242 / (115.242 + 612.292))|
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)|
|=||(1769.737 / 6372.622)||/||(1391.579 / 4813.754)|
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)|
|=||((1825.133 + 771.388) / 5534.578)||/||((1250.932 + 642.513) / 4361.059)|
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|
|=||(378.914 - 0.221||-||409.769)||/||5534.578|
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 -2.22 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
LKQ Corp Annual Data
LKQ Corp Quarterly Data