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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 -2.98. 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 * 0.9904||+||0.528 * 1.0227||+||0.404 * 0.9538||+||0.892 * 0.9193||+||0.115 * 0.9353|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0796||+||4.679 * -0.0686||-||0.327 * 1.2217|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,179 Mil.|
Revenue was 6497.7 + 5958.9 + 6572.2 + 6987.1 = $26,016 Mil.
Gross Profit was 2490.4 + 2201 + 2474.1 + 2681.2 = $9,847 Mil.
Total Current Assets was $5,972 Mil.
Total Assets was $34,948 Mil.
Property, Plant and Equipment(Net PPE) was $23,691 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,599 Mil.
Selling, General & Admin. Expense(SGA) was $2,414 Mil.
Total Current Liabilities was $2,761 Mil.
Long-Term Debt was $17,902 Mil.
Net Income was 1202.4 + 811.5 + 1097.5 + 1068.4 = $4,180 Mil.
Non Operating Income was 10.6 + 15.9 + 8.5 + -7.6 = $27 Mil.
Cash Flow from Operations was 1513.5 + 1699.5 + 1503.1 + 1832.9 = $6,549 Mil.
|Accounts Receivable was $1,295 Mil.
Revenue was 7181.7 + 6700.3 + 7093.2 + 7323.4 = $28,299 Mil.
Gross Profit was 2784.3 + 2516.1 + 2742.8 + 2910.6 = $10,954 Mil.
Total Current Assets was $5,914 Mil.
Total Assets was $37,781 Mil.
Property, Plant and Equipment(Net PPE) was $25,877 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,627 Mil.
Selling, General & Admin. Expense(SGA) was $2,432 Mil.
Total Current Liabilities was $3,392 Mil.
Long-Term Debt was $14,891 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)|
|=||(1178.6 / 26015.9)||/||(1294.5 / 28298.6)|
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)|
|=||(2201 / 28298.6)||/||(2490.4 / 26015.9)|
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 - (5972.2 + 23691.2) / 34947.9)||/||(1 - (5913.7 + 25877.3) / 37780.6)|
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))|
|=||(1626.7 / (1626.7 + 25877.3))||/||(1599.2 / (1599.2 + 23691.2))|
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)|
|=||(2413.5 / 26015.9)||/||(2431.7 / 28298.6)|
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)|
|=||((17901.6 + 2760.8) / 34947.9)||/||((14891.4 + 3391.7) / 37780.6)|
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|
|=||(4179.8 - 27.4||-||6549)||/||34947.9|
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 -2.98 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