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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 McDonald's Corp was -2.12. The lowest was -2.96. And the median was -2.63.
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 Corp 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 * 0.9378||+||0.528 * 1.0209||+||0.404 * 1.0115||+||0.892 * 0.9468||+||0.115 * 0.9055|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0741||+||4.679 * -0.0683||-||0.327 * 1.1389|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $1,092 Mil.|
Revenue was 5958.9 + 6572.2 + 6987.1 + 7181.7 = $26,700 Mil.
Gross Profit was 2201 + 2474.1 + 2681.2 + 2784.3 = $10,141 Mil.
Total Current Assets was $3,593 Mil.
Total Assets was $32,156 Mil.
Property, Plant and Equipment(Net PPE) was $23,302 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,620 Mil.
Selling, General & Admin. Expense(SGA) was $2,450 Mil.
Total Current Liabilities was $2,752 Mil.
Long-Term Debt was $14,292 Mil.
Net Income was 811.5 + 1097.5 + 1068.4 + 1387.1 = $4,365 Mil.
Non Operating Income was 15.9 + 8.5 + -7.6 + 20.4 = $37 Mil.
Cash Flow from Operations was 1699.5 + 1503.1 + 1832.9 + 1487 = $6,523 Mil.
|Accounts Receivable was $1,230 Mil.
Revenue was 6700.3 + 7093.2 + 7323.4 + 7083.8 = $28,201 Mil.
Gross Profit was 2516.1 + 2742.8 + 2910.6 + 2765.2 = $10,935 Mil.
Total Current Assets was $4,836 Mil.
Total Assets was $36,369 Mil.
Property, Plant and Equipment(Net PPE) was $25,650 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,604 Mil.
Selling, General & Admin. Expense(SGA) was $2,410 Mil.
Total Current Liabilities was $3,101 Mil.
Long-Term Debt was $13,825 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)|
|=||(1091.8 / 26699.9)||/||(1229.7 / 28200.7)|
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)|
|=||(2474.1 / 28200.7)||/||(2201 / 26699.9)|
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 - (3592.8 + 23301.7) / 32155.6)||/||(1 - (4836.3 + 25650) / 36369.1)|
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))|
|=||(1604.4 / (1604.4 + 25650))||/||(1620.2 / (1620.2 + 23301.7))|
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)|
|=||(2450.3 / 26699.9)||/||(2409.5 / 28200.7)|
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)|
|=||((14291.8 + 2751.9) / 32155.6)||/||((13825.4 + 3101.2) / 36369.1)|
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|
|=||(4364.5 - 37.2||-||6522.5)||/||32155.6|
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 Corp has a M-score of -2.96 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
McDonald's Corp Annual Data
McDonald's Corp Quarterly Data