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McDonald's Corporation (NYSE:MCD)
Beneish M-Score
-2.70 (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.

McDonald's Corporation has a M-score of -2.70 suggests that the company is not a manipulator.

MCD' s 10-Year Beneish M-Score Range
Min: -2.95   Max: -2.2
Current: -2.7

-2.95
-2.2

During the past 13 years, the highest Beneish M-Score of McDonald's Corporation was -2.20. The lowest was -2.95. And the median was -2.60.


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 McDonald's Corporation 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 * 0.9413+0.528 * 1.0115+0.404 * 0.9731+0.892 * 1.0195+0.115 * 0.9809
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.953+4.679 * -0.0407-0.327 * 0.9811
=-2.70

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $1,320 Mil.
Revenue was 7093.2 + 7323.4 + 7083.8 + 6605.3 = $28,106 Mil.
Gross Profit was 2742.8 + 2910.6 + 2765.2 + 2484.1 = $10,903 Mil.
Total Current Assets was $5,050 Mil.
Total Assets was $36,626 Mil.
Property, Plant and Equipment(Net PPE) was $25,747 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,585 Mil.
Selling, General & Admin. Expense(SGA) was $2,386 Mil.
Total Current Liabilities was $3,170 Mil.
Long-Term Debt was $14,130 Mil.
Net Income was 1397 + 1522.2 + 1396.5 + 1270.2 = $5,586 Mil.
Non Operating Income was -11.7 + -13.6 + -11.1 + -8.6 = $-45 Mil.
Cash Flow from Operations was 1873.5 + 2050.5 + 1509.8 + 1686.9 = $7,121 Mil.
Accounts Receivable was $1,375 Mil.
Revenue was 6952.1 + 7152.4 + 6915.9 + 6546.6 = $27,567 Mil.
Gross Profit was 2728.3 + 2854.6 + 2715.9 + 2517.5 = $10,816 Mil.
Total Current Assets was $4,922 Mil.
Total Assets was $35,387 Mil.
Property, Plant and Equipment(Net PPE) was $24,677 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,489 Mil.
Selling, General & Admin. Expense(SGA) was $2,455 Mil.
Total Current Liabilities was $3,403 Mil.
Long-Term Debt was $13,633 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)
=(1319.8 / 28105.7) / (1375.3 / 27567)
=0.04695845 / 0.04988936
=0.9413

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)
=(2910.6 / 27567) / (2742.8 / 28105.7)
=0.39236406 / 0.38791775
=1.0115

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 - (5050.1 + 25747.3) / 36626.3) / (1 - (4922.1 + 24677.2) / 35386.5)
=0.1591452 / 0.16354259
=0.9731

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
=28105.7 / 27567
=1.0195

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))
=(1488.5 / (1488.5 + 24677.2)) / (1585.1 / (1585.1 + 25747.3))
=0.05688745 / 0.05799344
=0.9809

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)
=(2385.6 / 28105.7) / (2455.2 / 27567)
=0.08487958 / 0.08906301
=0.953

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)
=((14129.8 + 3170) / 36626.3) / ((13632.5 + 3403.1) / 35386.5)
=0.47233272 / 0.48141523
=0.9811

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
=(5585.9 - -45 - 7120.7) / 36626.3
=-0.0407

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.

McDonald's Corporation has a M-score of -2.70 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 own currency.

McDonald's Corporation Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.93561.03580.92991.19760.8561.17771.05051.00911.00940.9413
GMI 1.58180.98260.9740.95630.94460.95020.96561.01161.00851.0115
AQI 0.98550.91091.07141.09491.00361.05970.99341.00530.93790.9731
SGI 1.08481.02811.0931.09051.03230.96691.05851.12181.02081.0195
DEPI 0.99370.91370.99321.10470.97191.05260.97770.93721.02570.9809
SGAI 0.34081.06260.99150.94550.9640.98090.98670.91451.00480.953
LVGI 0.91181.01920.90011.02641.11271.00271.00611.05131.01530.9811
TATA -0.0438-0.0549-0.0234-0.0879-0.0647-0.043-0.0423-0.048-0.0422-0.0409
M-score -2.23-2.75-2.52-2.60-2.95-2.54-2.60-2.59-2.67-2.70

McDonald's Corporation Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.07241.00910.95280.96111.02071.00940.98980.99630.98730.9413
GMI 1.00881.01161.00911.0051.00531.00851.01431.01451.01111.0115
AQI 0.96621.00530.99050.98041.01430.93790.95450.92990.93050.9731
SGI 1.10761.12181.11661.0751.03941.02081.00671.01251.01921.0195
DEPI 0.95120.93720.93080.92380.99941.02570.99170.99580.99390.9809
SGAI 0.9320.91450.9230.96090.99961.00481.00830.98650.9380.953
LVGI 1.06091.05131.02251.07241.0041.01530.98390.95750.97430.9811
TATA -0.0515-0.0482-0.0486-0.0454-0.0416-0.0417-0.0444-0.0436-0.0416-0.0407
M-score -2.58-2.59-2.65-2.69-2.61-2.67-2.70-2.68-2.67-2.70
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