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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.
LKQ Corporation has a M-score of -2.23 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of LKQ Corporation was -1.48. The lowest was -2.54. 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 Corporation 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 * 1.1965||+||0.528 * 1.0201||+||0.404 * 0.9703||+||0.892 * 1.2279||+||0.115 * 0.9101|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9712||+||4.679 * -0.0246||-||0.327 * 1.0428|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $458 Mil.|
Revenue was 1316.689 + 1298.094 + 1251.748 + 1195.997 = $5,063 Mil.
Gross Profit was 545.673 + 517.907 + 509.873 + 501.949 = $2,075 Mil.
Total Current Assets was $1,800 Mil.
Total Assets was $4,519 Mil.
Property, Plant and Equipment(Net PPE) was $547 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $1,454 Mil.
Total Current Liabilities was $678 Mil.
Long-Term Debt was $1,264 Mil.
Net Income was 77.864 + 73.445 + 75.722 + 84.592 = $312 Mil.
Non Operating Income was -2.476 + 0.85 + -2.448 + -1.225 = $-5 Mil.
Cash Flow from Operations was 87.127 + 131.439 + 103.057 + 106.433 = $428 Mil.
|Accounts Receivable was $312 Mil.
Revenue was 1067.915 + 1016.707 + 1006.531 + 1031.777 = $4,123 Mil.
Gross Profit was 445.121 + 409.705 + 421.931 + 447.383 = $1,724 Mil.
Total Current Assets was $1,384 Mil.
Total Assets was $3,723 Mil.
Property, Plant and Equipment(Net PPE) was $494 Mil.
Depreciation, Depletion and Amortization(DDA) was $70 Mil.
Selling, General & Admin. Expense(SGA) was $1,219 Mil.
Total Current Liabilities was $488 Mil.
Long-Term Debt was $1,047 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)|
|=||(458.094 / 5062.528)||/||(311.808 / 4122.93)|
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)|
|=||(517.907 / 4122.93)||/||(545.673 / 5062.528)|
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 - (1799.817 + 546.651) / 4518.774)||/||(1 - (1384.351 + 494.379) / 3723.456)|
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))|
|=||(70.165 / (70.165 + 494.379))||/||(86.463 / (86.463 + 546.651))|
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)|
|=||(1454.08 / 5062.528)||/||(1219.343 / 4122.93)|
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)|
|=||((1264.246 + 677.953) / 4518.774)||/||((1046.762 + 487.944) / 3723.456)|
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|
|=||(311.623 - -5.299||-||428.056)||/||4518.774|
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 Corporation has a M-score of -2.23 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 Corporation Annual Data
LKQ Corporation Quarterly Data