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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 Corp has a M-score of -2.71 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of McDonald's Corp was -2.19. The lowest was -2.95. And the median was -2.61.
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 * 0.9766||+||0.528 * 1.0069||+||0.404 * 0.9858||+||0.892 * 1.0182||+||0.115 * 1.0084|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9753||+||4.679 * -0.0472||-||0.327 * 1.0308|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|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.
Net Income was 1387.1 + 1204.8 + 1397 + 1522.2 = $5,511 Mil.
Non Operating Income was 20.4 + -20.6 + -11.7 + -13.6 = $-26 Mil.
Cash Flow from Operations was 1487 + 1907.3 + 1873.5 + 2050.5 = $7,318 Mil.
|Accounts Receivable was $1,302 Mil.
Revenue was 7083.8 + 6605.3 + 6952.1 + 7152.4 = $27,794 Mil.
Gross Profit was 2765.2 + 2484.1 + 2728.3 + 2854.6 = $10,832 Mil.
Total Current Assets was $4,632 Mil.
Total Assets was $34,453 Mil.
Property, Plant and Equipment(Net PPE) was $24,280 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,540 Mil.
Selling, General & Admin. Expense(SGA) was $2,449 Mil.
Total Current Liabilities was $2,805 Mil.
Long-Term Debt was $13,370 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)|
|=||(1294.5 / 28298.6)||/||(1301.9 / 27793.6)|
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)|
|=||(2516.1 / 27793.6)||/||(2784.3 / 28298.6)|
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 - (5913.7 + 25877.3) / 37780.6)||/||(1 - (4632.1 + 24280.4) / 34453.4)|
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))|
|=||(1539.9 / (1539.9 + 24280.4))||/||(1626.7 / (1626.7 + 25877.3))|
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)|
|=||(2431.7 / 28298.6)||/||(2448.9 / 27793.6)|
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)|
|=||((14891.4 + 3391.7) / 37780.6)||/||((13369.8 + 2805) / 34453.4)|
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|
|=||(5511.1 - -25.5||-||7318.3)||/||37780.6|
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 -2.71 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