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GuruFocus has detected 1 Warning Sign with Mastercard Inc $MA.
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Mastercard Inc (NYSE:MA)
Beneish M-Score
-2.36 (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.

Mastercard Inc has a M-score of -2.39 suggests that the company is not a manipulator.

MA' s Beneish M-Score Range Over the Past 10 Years
Min: -3.12   Max: -1.9
Current: -2.36

-3.12
-1.9

During the past 13 years, the highest Beneish M-Score of Mastercard Inc was -1.90. The lowest was -3.12. And the median was -2.48.


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 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 * 1.1773+0.528 * 1+0.404 * 0.8935+0.892 * 1.1147+0.115 * 1.0425
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.982+4.679 * -0.0217-0.327 * 1.1301
=-2.39

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $1,416 Mil.
Revenue was 2756 + 2880 + 2694 + 2446 = $10,776 Mil.
Gross Profit was 2756 + 2880 + 2694 + 2446 = $10,776 Mil.
Total Current Assets was $13,228 Mil.
Total Assets was $18,675 Mil.
Property, Plant and Equipment(Net PPE) was $733 Mil.
Depreciation, Depletion and Amortization(DDA) was $373 Mil.
Selling, General & Admin. Expense(SGA) was $4,534 Mil.
Total Current Liabilities was $7,206 Mil.
Long-Term Debt was $5,180 Mil.
Net Income was 933 + 1184 + 983 + 959 = $4,059 Mil.
Non Operating Income was -22 + -14 + 7 + 9 = $-20 Mil.
Cash Flow from Operations was 992 + 1425 + 1059 + 1008 = $4,484 Mil.
Accounts Receivable was $1,079 Mil.
Revenue was 2517 + 2530 + 2390 + 2230 = $9,667 Mil.
Gross Profit was 2517 + 2530 + 2390 + 2230 = $9,667 Mil.
Total Current Assets was $10,984 Mil.
Total Assets was $16,250 Mil.
Property, Plant and Equipment(Net PPE) was $675 Mil.
Depreciation, Depletion and Amortization(DDA) was $366 Mil.
Selling, General & Admin. Expense(SGA) was $4,142 Mil.
Total Current Liabilities was $6,269 Mil.
Long-Term Debt was $3,268 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)
=(1416 / 10776) / (1079 / 9667)
=0.13140312 / 0.11161684
=1.1773

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)
=(9667 / 9667) / (10776 / 10776)
=1 / 1
=1

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 - (13228 + 733) / 18675) / (1 - (10984 + 675) / 16250)
=0.25242303 / 0.28252308
=0.8935

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
=10776 / 9667
=1.1147

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))
=(366 / (366 + 675)) / (373 / (373 + 733))
=0.35158501 / 0.33725136
=1.0425

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)
=(4534 / 10776) / (4142 / 9667)
=0.42074981 / 0.42846798
=0.982

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)
=((5180 + 7206) / 18675) / ((3268 + 6269) / 16250)
=0.66323963 / 0.58689231
=1.1301

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
=(4059 - -20 - 4484) / 18675
=-0.0217

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 -2.39 suggests that the company will not 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.

Mastercard Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.96511.76350.8451.06120.58121.03990.92861.01070.9502
GMI 11111110.99661.0034
AQI 0.89331.3030.94180.81431.06410.90260.91921.24851.1651
SGI 1.22291.22721.02151.08631.21211.10081.12461.13581.0239
DEPI 1.12430.94141.11910.94790.83570.92090.99560.95960.9754
SGAI 0.90770.84150.89870.90280.94940.95840.95861.02321.0126
LVGI 0.99961.15770.91850.83311.10880.99821.07581.18851.166
TATA -0.0262-0.12560.00910.0169-0.0735-0.0165-0.07230.0123-0.0108
M-score -2.45-2.07-2.53-2.28-3.04-2.47-2.82-2.26-2.55

Mastercard Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 2.02991.01070.97290.92460.45660.95021.06340.99681.08951.1773
GMI 10.99660.99660.99670.99671.00341.00341.00341.00331
AQI 1.09391.24851.27061.27751.3891.16511.15660.97640.93780.8935
SGI 1.12411.13581.10741.07581.04811.02391.04041.071.10211.1147
DEPI 0.96270.95960.9440.986610.97540.99710.99531.02531.0425
SGAI 0.88250.92830.92581.15611.16921.11071.15581.04031.00570.982
LVGI 1.26891.18851.0041.031.01471.1661.20981.14941.18651.1301
TATA -0.03110.0123-0.0005-0.0073-0.0018-0.0108-0.0212-0.0315-0.0258-0.0217
M-score -1.60-2.25-2.30-2.44-2.82-2.56-2.52-2.63-2.51-2.39
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