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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 MasterCard Inc was -1.29. The lowest was -3.56. And the median was -2.56.
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 MasterCard 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 * 0.9968||+||0.528 * 1.039||+||0.404 * 0.9764||+||0.892 * 1.07||+||0.115 * 0.9953|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0358||+||4.679 * -0.0315||-||0.327 * 1.1494|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,203 Mil.|
Revenue was 2694 + 2446 + 2517 + 2530 = $10,187 Mil.
Gross Profit was 0 + 0 + 2517 + 2530 = $5,047 Mil.
Total Current Assets was $10,998 Mil.
Total Assets was $16,282 Mil.
Property, Plant and Equipment(Net PPE) was $680 Mil.
Depreciation, Depletion and Amortization(DDA) was $375 Mil.
Selling, General & Admin. Expense(SGA) was $4,524 Mil.
Total Current Liabilities was $6,462 Mil.
Long-Term Debt was $3,306 Mil.
Net Income was 983 + 959 + 890 + 977 = $3,809 Mil.
Non Operating Income was 7 + 9 + -70 + -2 = $-56 Mil.
Cash Flow from Operations was 1059 + 1008 + 1039 + 1272 = $4,378 Mil.
|Accounts Receivable was $1,128 Mil.
Revenue was 2390 + 2230 + 2411 + 2490 = $9,521 Mil.
Gross Profit was 0 + 0 + 2411 + 2490 = $4,901 Mil.
Total Current Assets was $10,217 Mil.
Total Assets was $15,272 Mil.
Property, Plant and Equipment(Net PPE) was $632 Mil.
Depreciation, Depletion and Amortization(DDA) was $346 Mil.
Selling, General & Admin. Expense(SGA) was $4,082 Mil.
Total Current Liabilities was $6,476 Mil.
Long-Term Debt was $1,495 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)|
|=||(1203 / 10187)||/||(1128 / 9521)|
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)|
|=||(4901 / 9521)||/||(5047 / 10187)|
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 - (10998 + 680) / 16282)||/||(1 - (10217 + 632) / 15272)|
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))|
|=||(346 / (346 + 632))||/||(375 / (375 + 680))|
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)|
|=||(4524 / 10187)||/||(4082 / 9521)|
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)|
|=||((3306 + 6462) / 16282)||/||((1495 + 6476) / 15272)|
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|
|=||(3809 - -56||-||4378)||/||16282|
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.
MasterCard Inc has a M-score of -2.61 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
MasterCard Inc Annual Data
MasterCard Inc Quarterly Data