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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 -1.48. The lowest was -2.92. And the median was -2.45.
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 * 0.9546||+||0.528 * 1.0055||+||0.404 * 0.9588||+||0.892 * 1.036||+||0.115 * 0.9668|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0301||+||4.679 * -0.0343||-||0.327 * 1.0353|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $3,750 Mil.|
Revenue was 4366 + 4273 + 4565 + 4163 = $17,367 Mil.
Gross Profit was 3224 + 3168 + 3394 + 3113 = $12,899 Mil.
Total Current Assets was $21,597 Mil.
Total Assets was $38,780 Mil.
Property, Plant and Equipment(Net PPE) was $2,361 Mil.
Depreciation, Depletion and Amortization(DDA) was $852 Mil.
Selling, General & Admin. Expense(SGA) was $6,006 Mil.
Total Current Liabilities was $6,952 Mil.
Long-Term Debt was $9,708 Mil.
Net Income was 828 + 871 + 448 + 762 = $2,909 Mil.
Non Operating Income was 0 + 0 + 122 + -45 = $77 Mil.
Cash Flow from Operations was 913 + 310 + 1328 + 1612 = $4,163 Mil.
|Accounts Receivable was $3,792 Mil.
Revenue was 4194 + 4083 + 4460 + 4027 = $16,764 Mil.
Gross Profit was 3104 + 3061 + 3326 + 3028 = $12,519 Mil.
Total Current Assets was $19,483 Mil.
Total Assets was $36,468 Mil.
Property, Plant and Equipment(Net PPE) was $2,448 Mil.
Depreciation, Depletion and Amortization(DDA) was $844 Mil.
Selling, General & Admin. Expense(SGA) was $5,628 Mil.
Total Current Liabilities was $5,496 Mil.
Long-Term Debt was $9,637 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)|
|=||(3750 / 17367)||/||(3792 / 16764)|
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)|
|=||(3168 / 16764)||/||(3224 / 17367)|
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 - (21597 + 2361) / 38780)||/||(1 - (19483 + 2448) / 36468)|
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 + 2448))||/||(852 / (852 + 2361))|
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)|
|=||(6006 / 17367)||/||(5628 / 16764)|
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)|
|=||((9708 + 6952) / 38780)||/||((9637 + 5496) / 36468)|
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|
|=||(2909 - 77||-||4163)||/||38780|
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 -2.68 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
Medtronic PLC Annual Data
Medtronic PLC Quarterly Data