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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 -2.22.
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 * 1.2823||+||0.528 * 1.0245||+||0.404 * 1.0138||+||0.892 * 1.1936||+||0.115 * 1.087|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9693||+||4.679 * -0.0095||-||0.327 * 1.274|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $959 Mil.|
Revenue was 2386.83 + 2450.693 + 1921.476 + 1748.919 = $8,508 Mil.
Gross Profit was 883.412 + 921.947 + 760.437 + 697.327 = $3,263 Mil.
Total Current Assets was $3,296 Mil.
Total Assets was $8,204 Mil.
Property, Plant and Equipment(Net PPE) was $1,024 Mil.
Depreciation, Depletion and Amortization(DDA) was $184 Mil.
Selling, General & Admin. Expense(SGA) was $2,271 Mil.
Total Current Liabilities was $1,149 Mil.
Long-Term Debt was $3,189 Mil.
Net Income was 122.688 + 140.737 + 107.732 + 95.06 = $466 Mil.
Non Operating Income was 3.279 + -1.339 + -5.419 + -1.366 = $-5 Mil.
Cash Flow from Operations was 168.921 + 225.023 + 130.207 + 24.842 = $549 Mil.
|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.
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)|
|=||(959.321 / 8507.918)||/||(626.78 / 7127.845)|
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)|
|=||(2800.761 / 7127.845)||/||(3263.123 / 8507.918)|
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 - (3295.541 + 1023.707) / 8203.952)||/||(1 - (2387.143 + 652.78) / 5704.032)|
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))|
|=||(129.478 / (129.478 + 652.78))||/||(183.874 / (183.874 + 1023.707))|
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)|
|=||(2271.278 / 8507.918)||/||(1963.135 / 7127.845)|
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)|
|=||((3189.345 + 1149.208) / 8203.952)||/||((1570.056 + 797.698) / 5704.032)|
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|
|=||(466.217 - -4.845||-||548.993)||/||8203.952|
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 -2.15 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