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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.
McDonald's Corporation has a M-score of -2.70 suggests that the company is not a manipulator.
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.
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|
* 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
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)|
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)|
|=||(2910.6 / 27567)||/||(2742.8 / 28105.7)|
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 - (5050.1 + 25747.3) / 36626.3)||/||(1 - (4922.1 + 24677.2) / 35386.5)|
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))|
|=||(1488.5 / (1488.5 + 24677.2))||/||(1585.1 / (1585.1 + 25747.3))|
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)|
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)|
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|
|=||(5585.9 - -45||-||7120.7)||/||36626.3|
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.
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 Corporation Annual Data
McDonald's Corporation Quarterly Data