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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 -2.93. 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 * 0.7646||+||0.528 * 1.0083||+||0.404 * 1.0722||+||0.892 * 1.4231||+||0.115 * 0.5908|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9638||+||4.679 * -0.0168||-||0.327 * 0.9319|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $5,562 Mil.|
Revenue was 7567 + 6934 + 7058 + 7274 = $28,833 Mil.
Gross Profit was 5204 + 4793 + 4876 + 4818 = $19,691 Mil.
Total Current Assets was $23,600 Mil.
Total Assets was $99,782 Mil.
Property, Plant and Equipment(Net PPE) was $4,841 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,820 Mil.
Selling, General & Admin. Expense(SGA) was $9,469 Mil.
Total Current Liabilities was $7,165 Mil.
Long-Term Debt was $30,247 Mil.
Net Income was 1103 + 1095 + 520 + 820 = $3,538 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1326 + 1797 + 1279 + 816 = $5,218 Mil.
|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.
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)|
|=||(5562 / 28833)||/||(5112 / 20261)|
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)|
|=||(13952 / 20261)||/||(19691 / 28833)|
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 - (23600 + 4841) / 99782)||/||(1 - (30844 + 4699) / 106685)|
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))|
|=||(1306 / (1306 + 4699))||/||(2820 / (2820 + 4841))|
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)|
|=||(9469 / 28833)||/||(6904 / 20261)|
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)|
|=||((30247 + 7165) / 99782)||/||((33752 + 9173) / 106685)|
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|
|=||(3538 - 0||-||5218)||/||99782|
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 -2.38 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