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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.
Lorillard Inc has a M-score of -2.11 signals that the company is a manipulator.
During the past 11 years, the highest Beneish M-Score of Lorillard Inc was -1.70. The lowest was -3.55. And the median was -2.58.
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 Lorillard Inc 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 * 0.9477||+||0.528 * 1.0345||+||0.404 * 2.1061||+||0.892 * 1.0317||+||0.115 * 0.703|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2215||+||4.679 * 0.0097||-||0.327 * 1.1523|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $44 Mil.|
Revenue was 1799 + 1592 + 1742 + 1827 = $6,960 Mil.
Gross Profit was 683 + 619 + 659 + 669 = $2,630 Mil.
Total Current Assets was $2,053 Mil.
Total Assets was $2,893 Mil.
Property, Plant and Equipment(Net PPE) was $312 Mil.
Depreciation, Depletion and Amortization(DDA) was $64 Mil.
Selling, General & Admin. Expense(SGA) was $673 Mil.
Total Current Liabilities was $1,153 Mil.
Long-Term Debt was $3,566 Mil.
Net Income was 300 + 271 + 282 + 258 = $1,111 Mil.
Non Operating Income was -2 + 0 + 0 + 0 = $-2 Mil.
Cash Flow from Operations was -628 + 703 + 457 + 553 = $1,085 Mil.
|Accounts Receivable was $45 Mil.
Revenue was 1804 + 1577 + 1704 + 1661 = $6,746 Mil.
Gross Profit was 678 + 713 + 644 + 602 = $2,637 Mil.
Total Current Assets was $2,737 Mil.
Total Assets was $3,335 Mil.
Property, Plant and Equipment(Net PPE) was $309 Mil.
Depreciation, Depletion and Amortization(DDA) was $42 Mil.
Selling, General & Admin. Expense(SGA) was $534 Mil.
Total Current Liabilities was $1,150 Mil.
Long-Term Debt was $3,571 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(44 / 6960)||/||(45 / 6746)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(619 / 6746)||/||(683 / 6960)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2053 + 312) / 2893)||/||(1 - (2737 + 309) / 3335)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(42 / (42 + 309))||/||(64 / (64 + 312))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(673 / 6960)||/||(534 / 6746)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((3566 + 1153) / 2893)||/||((3571 + 1150) / 3335)|
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|
|=||(1111 - -2||-||1085)||/||2893|
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.
Lorillard Inc has a M-score of -2.11 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
Lorillard Inc Annual Data
Lorillard Inc Quarterly Data