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Level 3 Communications Inc (NYSE:LVLT)
Beneish M-Score
-2.20 (As of Today)

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.

Level 3 Communications Inc has a M-score of -2.20 signals that the company is a manipulator.

LVLT' s Beneish M-Score Range Over the Past 10 Years
Min: -5.52   Max: -0.73
Current: -2.2

-5.52
-0.73

During the past 13 years, the highest Beneish M-Score of Level 3 Communications Inc was -0.73. The lowest was -5.52. And the median was -2.67.


Definition

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 Level 3 Communications 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 * 0.9131+0.528 * 0.9519+0.404 * 1.0873+0.892 * 1.0127+0.115 * 0.955
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.947+4.679 * 0.0607-0.327 * 0.8381
=-2.20

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $749 Mil.
Revenue was 2033 + 2056 + 2051 + 2053 = $8,193 Mil.
Gross Profit was 1021 + 1041 + 1019 + 1001 = $4,082 Mil.
Total Current Assets was $2,457 Mil.
Total Assets was $24,746 Mil.
Property, Plant and Equipment(Net PPE) was $10,167 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,224 Mil.
Selling, General & Admin. Expense(SGA) was $1,430 Mil.
Total Current Liabilities was $1,507 Mil.
Long-Term Debt was $10,875 Mil.
Net Income was 143 + 149 + 124 + 3323 = $3,739 Mil.
Non Operating Income was 1 + -45 + -10 + -52 = $-106 Mil.
Cash Flow from Operations was 645 + 631 + 510 + 556 = $2,342 Mil.
Accounts Receivable was $810 Mil.
Revenue was 2062 + 2061 + 2053 + 1914 = $8,090 Mil.
Gross Profit was 987 + 1002 + 974 + 874 = $3,837 Mil.
Total Current Assets was $1,663 Mil.
Total Assets was $20,883 Mil.
Property, Plant and Equipment(Net PPE) was $9,812 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,122 Mil.
Selling, General & Admin. Expense(SGA) was $1,491 Mil.
Total Current Liabilities was $1,470 Mil.
Long-Term Debt was $10,997 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(749 / 8193) / (810 / 8090)
=0.0914195 / 0.10012361
=0.9131

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(3837 / 8090) / (4082 / 8193)
=0.47428925 / 0.4982302
=0.9519

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2457 + 10167) / 24746) / (1 - (1663 + 9812) / 20883)
=0.48985695 / 0.45050998
=1.0873

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=8193 / 8090
=1.0127

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))
=(1122 / (1122 + 9812)) / (1224 / (1224 + 10167))
=0.10261569 / 0.10745325
=0.955

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)
=(1430 / 8193) / (1491 / 8090)
=0.17453924 / 0.18430161
=0.947

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)
=((10875 + 1507) / 24746) / ((10997 + 1470) / 20883)
=0.5003637 / 0.59699277
=0.8381

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(3739 - -106 - 2342) / 24746
=0.0607

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.

Level 3 Communications Inc has a M-score of -2.20 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Level 3 Communications Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.42320.98060.95820.94690.84222.06820.74880.9521.02010.8459
GMI 1.27030.96550.98490.99210.98670.97631.02430.97261.37390.9196
AQI 0.96582.0231.00711.00741.06671.01830.96771.00641.8551.1276
SGI 1.96511.26381.00750.87470.97051.18681.47150.99011.07351.2143
DEPI 1.01480.8270.95570.94750.97741.57491.07560.94591.16840.7174
SGAI 0.83251.08380.8671.01641.05741.07950.93340.99330.4631.023
LVGI 0.92160.91790.99521.05981.07720.88081.01820.97940.81080.8305
TATA -0.0882-0.0949-0.0979-0.1121-0.1105-0.0771-0.0588-0.057-0.03460.0826
M-score -2.38-2.32-2.96-3.19-3.19-1.61-2.55-2.81-1.84-2.02

Level 3 Communications Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.99220.89881.02010.9340.87590.95470.84590.95331.03350.9131
GMI 0.97151.05271.14691.2381.32521.20861.10151.0160.94570.9519
AQI 0.96980.89951.8551.8221.88722.02231.12761.09861.09381.0873
SGI 1.00931.02211.07351.13811.19551.25141.21431.13931.07381.0127
DEPI 1.00381.02831.16841.01990.91770.82230.71740.80960.87140.955
SGAI 0.94520.79870.69590.60420.51040.61320.68060.79810.96670.947
LVGI 0.95490.98750.81080.81470.80180.77950.83050.85830.84640.8381
TATA -0.0528-0.0559-0.0346-0.0405-0.0434-0.05220.08260.07120.06510.0607
M-score -2.73-2.79-2.00-2.02-1.95-1.90-1.86-1.96-2.03-2.20
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