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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 * 0.9195||+||0.528 * 1.0116||+||0.404 * 1.0032||+||0.892 * 1.1185||+||0.115 * 0.957|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9917||+||4.679 * -0.0229||-||0.327 * 0.8848|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $627 Mil.|
Revenue was 1831.732 + 1838.07 + 1773.912 + 1684.131 = $7,128 Mil.
Gross Profit was 712.779 + 723.944 + 699.479 + 664.559 = $2,801 Mil.
Total Current Assets was $2,387 Mil.
Total Assets was $5,704 Mil.
Property, Plant and Equipment(Net PPE) was $653 Mil.
Depreciation, Depletion and Amortization(DDA) was $129 Mil.
Selling, General & Admin. Expense(SGA) was $1,963 Mil.
Total Current Liabilities was $798 Mil.
Long-Term Debt was $1,570 Mil.
Net Income was 101.346 + 119.722 + 107.095 + 80.469 = $409 Mil.
Non Operating Income was 2.928 + -0.097 + -1.919 + -1.17 = $-0 Mil.
Cash Flow from Operations was 208.624 + 102.554 + 180.145 + 48.255 = $540 Mil.
|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.
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)|
|=||(626.78 / 7127.845)||/||(609.434 / 6372.622)|
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)|
|=||(723.944 / 6372.622)||/||(712.779 / 7127.845)|
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 - (2387.143 + 652.78) / 5704.032)||/||(1 - (2345.538 + 612.292) / 5534.578)|
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))|
|=||(115.242 / (115.242 + 612.292))||/||(129.478 / (129.478 + 652.78))|
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)|
|=||(1963.135 / 7127.845)||/||(1769.737 / 6372.622)|
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)|
|=||((1570.056 + 797.698) / 5704.032)||/||((1825.133 + 771.388) / 5534.578)|
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|
|=||(408.632 - -0.258||-||539.578)||/||5704.032|
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 -2.51 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