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McDonald's Corp (NYSE:MCD)
Beneish M-Score
-2.86 (As of Today)

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 -2.86 suggests that the company is not a manipulator.

MCD' s 10-Year Beneish M-Score Range
Min: -2.95   Max: -2.2
Current: -2.86

-2.95
-2.2

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 -2.60.


Definition

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 * 0.9424+0.528 * 1.0181+0.404 * 1.0152+0.892 * 0.9764+0.115 * 0.924
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0681+4.679 * -0.0576-0.327 * 1.0954
=-2.86

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $1,214 Mil.
Revenue was 6572.2 + 6987.1 + 7181.7 + 6700.3 = $27,441 Mil.
Gross Profit was 2474.1 + 2681.2 + 2784.3 + 2516.1 = $10,456 Mil.
Total Current Assets was $4,186 Mil.
Total Assets was $34,281 Mil.
Property, Plant and Equipment(Net PPE) was $24,558 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,645 Mil.
Selling, General & Admin. Expense(SGA) was $2,488 Mil.
Total Current Liabilities was $2,748 Mil.
Long-Term Debt was $14,990 Mil.
Net Income was 1097.5 + 1068.4 + 1387.1 + 1204.8 = $4,758 Mil.
Non Operating Income was 8.5 + -7.6 + 20.4 + -20.6 = $1 Mil.
Cash Flow from Operations was 1503.1 + 1832.9 + 1487 + 1907.3 = $6,730 Mil.
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.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1214.4 / 27441.3) / (1319.8 / 28105.7)
=0.04425446 / 0.04695845
=0.9424

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(2681.2 / 28105.7) / (2474.1 / 27441.3)
=0.38791775 / 0.38102058
=1.0181

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (4185.5 + 24557.5) / 34281.4) / (1 - (5050.1 + 25747.3) / 36626.3)
=0.161557 / 0.1591452
=1.0152

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=27441.3 / 28105.7
=0.9764

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))
=(1585.1 / (1585.1 + 25747.3)) / (1644.5 / (1644.5 + 24557.5))
=0.05799344 / 0.06276238
=0.924

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)
=(2487.9 / 27441.3) / (2385.6 / 28105.7)
=0.09066261 / 0.08487958
=1.0681

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)
=((14989.7 + 2747.9) / 34281.4) / ((14129.8 + 3170) / 36626.3)
=0.51741177 / 0.47233272
=1.0954

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(4757.8 - 0.7 - 6730.3) / 34281.4
=-0.0576

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 -2.86 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

McDonald's Corp Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.03580.92991.19760.8561.17771.05051.00911.00940.94130.9424
GMI 0.98260.9740.95630.94460.95020.96561.01161.00851.01151.0181
AQI 0.91091.07141.09491.00361.05970.99341.00530.93790.97311.0152
SGI 1.02811.0931.09051.03230.96691.05851.12181.02081.01950.9764
DEPI 0.91370.99321.10470.97191.05260.97770.93721.02570.98090.924
SGAI 1.06260.99150.94550.9640.98090.98670.91451.00480.9531.0681
LVGI 1.01920.90011.02641.11271.00271.00611.05131.01530.98111.0954
TATA -0.0549-0.0234-0.0879-0.0647-0.043-0.0423-0.048-0.0422-0.0409-0.0573
M-score -2.75-2.52-2.60-2.95-2.54-2.60-2.59-2.67-2.70-2.86

McDonald's Corp Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.02071.00940.98980.99630.98730.94130.97940.97660.95450.9424
GMI 1.00531.00851.01431.01451.01111.01151.00661.00691.01521.0181
AQI 1.01430.93790.95450.92990.93050.97310.97820.98581.00231.0152
SGI 1.03941.02081.00671.01251.01921.01951.02081.01820.99990.9764
DEPI 0.99941.02570.99170.99580.99390.98090.99731.00840.9490.924
SGAI 0.99961.00481.00830.98650.9380.9530.95980.97531.02981.0681
LVGI 1.0041.01530.98390.95750.97430.98111.00421.03081.0661.0954
TATA -0.0416-0.0417-0.0444-0.0437-0.0416-0.041-0.0488-0.0473-0.0565-0.0576
M-score -2.61-2.67-2.70-2.68-2.67-2.70-2.71-2.71-2.81-2.86
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