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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 Medtronic PLC was -0.27. The lowest was -2.96. And the median was -2.48.
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 Medtronic PLC 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 * 0.8359||+||0.528 * 1.122||+||0.404 * 2.5711||+||0.892 * 1.6305||+||0.115 * 0.7088|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9661||+||4.679 * -0.0328||-||0.327 * 0.6973|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $4,863 Mil.|
Revenue was 6934 + 7058 + 7274 + 7304 = $28,570 Mil.
Gross Profit was 4793 + 4876 + 4818 + 4370 = $18,857 Mil.
Total Current Assets was $27,569 Mil.
Total Assets was $102,706 Mil.
Property, Plant and Equipment(Net PPE) was $4,636 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,789 Mil.
Selling, General & Admin. Expense(SGA) was $9,513 Mil.
Total Current Liabilities was $8,141 Mil.
Long-Term Debt was $33,681 Mil.
Net Income was 1095 + 520 + 820 + -1 = $2,434 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1797 + 1279 + 816 + 1912 = $5,804 Mil.
|Accounts Receivable was $3,568 Mil.
Revenue was 4318 + 4366 + 4273 + 4565 = $17,522 Mil.
Gross Profit was 3190 + 3224 + 3168 + 3394 = $12,976 Mil.
Total Current Assets was $38,161 Mil.
Total Assets was $55,233 Mil.
Property, Plant and Equipment(Net PPE) was $2,326 Mil.
Depreciation, Depletion and Amortization(DDA) was $844 Mil.
Selling, General & Admin. Expense(SGA) was $6,039 Mil.
Total Current Liabilities was $5,613 Mil.
Long-Term Debt was $26,641 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)|
|=||(4863 / 28570)||/||(3568 / 17522)|
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)|
|=||(12976 / 17522)||/||(18857 / 28570)|
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 - (27569 + 4636) / 102706)||/||(1 - (38161 + 2326) / 55233)|
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))|
|=||(844 / (844 + 2326))||/||(2789 / (2789 + 4636))|
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)|
|=||(9513 / 28570)||/||(6039 / 17522)|
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)|
|=||((33681 + 8141) / 102706)||/||((26641 + 5613) / 55233)|
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|
|=||(2434 - 0||-||5804)||/||102706|
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.
Medtronic PLC has a M-score of -1.45 signals that the company is likely to 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
Medtronic PLC Annual Data
Medtronic PLC Quarterly Data