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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 -1.90. The lowest was -2.89. And the median was -2.44.
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 * 1.1258||+||0.528 * 1.0822||+||0.404 * 1.7643||+||0.892 * 1.1915||+||0.115 * 1.2055|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.991||+||4.679 * -0.0209||-||0.327 * 0.9617|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $5,112 Mil.|
Revenue was 7304 + 4318 + 4366 + 4273 = $20,261 Mil.
Gross Profit was 4370 + 3190 + 3224 + 3168 = $13,952 Mil.
Total Current Assets was $30,844 Mil.
Total Assets was $106,685 Mil.
Property, Plant and Equipment(Net PPE) was $4,699 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,306 Mil.
Selling, General & Admin. Expense(SGA) was $6,904 Mil.
Total Current Liabilities was $9,173 Mil.
Long-Term Debt was $33,752 Mil.
Net Income was -1 + 977 + 828 + 871 = $2,675 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1912 + 1767 + 913 + 310 = $4,902 Mil.
|Accounts Receivable was $3,811 Mil.
Revenue was 4565 + 4163 + 4194 + 4083 = $17,005 Mil.
Gross Profit was 3394 + 3113 + 3104 + 3061 = $12,672 Mil.
Total Current Assets was $21,210 Mil.
Total Assets was $37,943 Mil.
Property, Plant and Equipment(Net PPE) was $2,392 Mil.
Depreciation, Depletion and Amortization(DDA) was $850 Mil.
Selling, General & Admin. Expense(SGA) was $5,847 Mil.
Total Current Liabilities was $5,559 Mil.
Long-Term Debt was $10,315 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)|
|=||(5112 / 20261)||/||(3811 / 17005)|
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)|
|=||(3190 / 17005)||/||(4370 / 20261)|
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 - (30844 + 4699) / 106685)||/||(1 - (21210 + 2392) / 37943)|
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))|
|=||(850 / (850 + 2392))||/||(1306 / (1306 + 4699))|
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)|
|=||(6904 / 20261)||/||(5847 / 17005)|
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)|
|=||((33752 + 9173) / 106685)||/||((10315 + 5559) / 37943)|
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|
|=||(2675 - 0||-||4902)||/||106685|
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 -1.90 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