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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 Corp has a M-score of -2.09 signals that the company is a 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 -2.23.
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 * 1.1509||+||0.528 * 1.0268||+||0.404 * 0.9893||+||0.892 * 1.3127||+||0.115 * 0.8891|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.961||+||4.679 * -0.002||-||0.327 * 1.0786|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $624 Mil.|
Revenue was 1709.132 + 1625.777 + 1316.689 + 1298.094 = $5,950 Mil.
Gross Profit was 671.059 + 651.884 + 545.673 + 517.907 = $2,387 Mil.
Total Current Assets was $2,241 Mil.
Total Assets was $5,499 Mil.
Property, Plant and Equipment(Net PPE) was $622 Mil.
Depreciation, Depletion and Amortization(DDA) was $106 Mil.
Selling, General & Admin. Expense(SGA) was $1,667 Mil.
Total Current Liabilities was $750 Mil.
Long-Term Debt was $1,880 Mil.
Net Income was 104.882 + 104.653 + 77.864 + 73.445 = $361 Mil.
Non Operating Income was 1.697 + 0.994 + -2.476 + 0.85 = $1 Mil.
Cash Flow from Operations was 55.195 + 97.009 + 87.127 + 131.439 = $371 Mil.
|Accounts Receivable was $413 Mil.
Revenue was 1251.748 + 1195.997 + 1067.915 + 1016.707 = $4,532 Mil.
Gross Profit was 509.873 + 501.949 + 445.121 + 409.705 = $1,867 Mil.
Total Current Assets was $1,658 Mil.
Total Assets was $4,218 Mil.
Property, Plant and Equipment(Net PPE) was $515 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $1,322 Mil.
Total Current Liabilities was $559 Mil.
Long-Term Debt was $1,312 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)|
|=||(624.3 / 5949.692)||/||(413.215 / 4532.367)|
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)|
|=||(651.884 / 4532.367)||/||(671.059 / 5949.692)|
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 - (2240.726 + 621.6) / 5498.845)||/||(1 - (1658.49 + 515.353) / 4218.315)|
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))|
|=||(76.43 / (76.43 + 515.353))||/||(105.645 / (105.645 + 621.6))|
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)|
|=||(1667.094 / 5949.692)||/||(1321.531 / 4532.367)|
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)|
|=||((1879.837 + 750.208) / 5498.845)||/||((1311.519 + 559.11) / 4218.315)|
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|
|=||(360.844 - 1.065||-||370.77)||/||5498.845|
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 -2.09 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