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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 -2.20. The lowest was -2.95. 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 * 1.1715||+||0.528 * 0.9294||+||0.404 * 1.1614||+||0.892 * 0.9689||+||0.115 * 0.9469|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.011||+||4.679 * -0.0442||-||0.327 * 1.3256|
* 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 $1,474 Mil.|
Revenue was 6028.9 + 6424.1 + 6265 + 5903.9 = $24,622 Mil.
Gross Profit was 2558.2 + 2747 + 2586 + 2313.5 = $10,205 Mil.
Total Current Assets was $4,849 Mil.
Total Assets was $31,024 Mil.
Property, Plant and Equipment(Net PPE) was $21,258 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,517 Mil.
Selling, General & Admin. Expense(SGA) was $2,385 Mil.
Total Current Liabilities was $3,468 Mil.
Long-Term Debt was $25,879 Mil.
Net Income was 1193.4 + 1275.4 + 1092.9 + 1098.6 = $4,660 Mil.
Non Operating Income was -12.9 + -11.4 + 13.2 + 10.6 = $-1 Mil.
Cash Flow from Operations was 814.9 + 2251.1 + 1248.4 + 1719.1 = $6,034 Mil.
|Accounts Receivable was $1,299 Mil.
Revenue was 6341.3 + 6615.1 + 6497.7 + 5958.9 = $25,413 Mil.
Gross Profit was 2506.5 + 2591.3 + 2490.4 + 2201 = $9,789 Mil.
Total Current Assets was $9,643 Mil.
Total Assets was $37,939 Mil.
Property, Plant and Equipment(Net PPE) was $23,118 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,556 Mil.
Selling, General & Admin. Expense(SGA) was $2,434 Mil.
Total Current Liabilities was $2,950 Mil.
Long-Term Debt was $24,122 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)|
|=||(1474.1 / 24621.9)||/||(1298.7 / 25413)|
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)|
|=||(9789.2 / 25413)||/||(10204.7 / 24621.9)|
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 - (4848.6 + 21257.6) / 31023.9)||/||(1 - (9643 + 23117.6) / 37938.7)|
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))|
|=||(1555.7 / (1555.7 + 23117.6))||/||(1516.5 / (1516.5 + 21257.6))|
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)|
|=||(2384.5 / 24621.9)||/||(2434.3 / 25413)|
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)|
|=||((25878.5 + 3468.3) / 31023.9)||/||((24122.1 + 2950.4) / 37938.7)|
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|
|=||(4660.3 - -0.5||-||6033.5)||/||31023.9|
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 -2.64 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