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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 * 0.891||+||0.528 * 1.0339||+||0.404 * 0.9588||+||0.892 * 1.2542||+||0.115 * 0.8082|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9686||+||4.679 * -0.0124||-||0.327 * 0.9331|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $645 Mil.|
Revenue was 1773.912 + 1684.131 + 1721.024 + 1709.132 = $6,888 Mil.
Gross Profit was 699.479 + 664.559 + 664.411 + 671.059 = $2,700 Mil.
Total Current Assets was $2,337 Mil.
Total Assets was $5,522 Mil.
Property, Plant and Equipment(Net PPE) was $622 Mil.
Depreciation, Depletion and Amortization(DDA) was $128 Mil.
Selling, General & Admin. Expense(SGA) was $1,896 Mil.
Total Current Liabilities was $772 Mil.
Long-Term Debt was $1,672 Mil.
Net Income was 107.095 + 80.469 + 91.515 + 104.882 = $384 Mil.
Non Operating Income was -1.919 + -1.17 + 0.006 + 1.697 = $-1 Mil.
Cash Flow from Operations was 180.145 + 48.255 + 170.438 + 55.195 = $454 Mil.
|Accounts Receivable was $577 Mil.
Revenue was 1625.777 + 1316.689 + 1298.094 + 1251.748 = $5,492 Mil.
Gross Profit was 651.884 + 545.673 + 517.907 + 509.873 = $2,225 Mil.
Total Current Assets was $2,093 Mil.
Total Assets was $5,210 Mil.
Property, Plant and Equipment(Net PPE) was $594 Mil.
Depreciation, Depletion and Amortization(DDA) was $95 Mil.
Selling, General & Admin. Expense(SGA) was $1,561 Mil.
Total Current Liabilities was $776 Mil.
Long-Term Debt was $1,696 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)|
|=||(645.037 / 6888.199)||/||(577.212 / 5492.308)|
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)|
|=||(664.559 / 5492.308)||/||(699.479 / 6888.199)|
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 - (2337.179 + 621.571) / 5522.466)||/||(1 - (2093.481 + 593.867) / 5209.828)|
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))|
|=||(95.269 / (95.269 + 593.867))||/||(128.26 / (128.26 + 621.571))|
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)|
|=||(1896.114 / 6888.199)||/||(1560.939 / 5492.308)|
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)|
|=||((1672.332 + 772.314) / 5522.466)||/||((1695.627 + 775.915) / 5209.828)|
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|
|=||(383.961 - -1.386||-||454.033)||/||5522.466|
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 -2.41 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