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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 Plains All American Pipeline LP was -0.50. The lowest was -3.28. And the median was -2.32.
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 Plains All American Pipeline LP 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 * 0.9094||+||0.528 * 1.1244||+||0.404 * 0.9686||+||0.892 * 1.0872||+||0.115 * 1.0911|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8834||+||4.679 * -0.0195||-||0.327 * 1.017|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $3,522 Mil.|
Revenue was 11127 + 11195 + 11684 + 10632 = $44,638 Mil.
Gross Profit was 579 + 555 + 678 + 588 = $2,400 Mil.
Total Current Assets was $5,160 Mil.
Total Assets was $21,837 Mil.
Property, Plant and Equipment(Net PPE) was $11,965 Mil.
Depreciation, Depletion and Amortization(DDA) was $403 Mil.
Selling, General & Admin. Expense(SGA) was $340 Mil.
Total Current Liabilities was $5,568 Mil.
Long-Term Debt was $7,613 Mil.
Net Income was 323 + 287 + 384 + 309 = $1,303 Mil.
Non Operating Income was 25 + 27 + 18 + 21 = $91 Mil.
Cash Flow from Operations was 315 + 141 + 822 + 360 = $1,638 Mil.
|Accounts Receivable was $3,562 Mil.
Revenue was 10703 + 10295 + 10620 + 9439 = $41,057 Mil.
Gross Profit was 468 + 565 + 843 + 606 = $2,482 Mil.
Total Current Assets was $5,145 Mil.
Total Assets was $20,267 Mil.
Property, Plant and Equipment(Net PPE) was $10,607 Mil.
Depreciation, Depletion and Amortization(DDA) was $391 Mil.
Selling, General & Admin. Expense(SGA) was $354 Mil.
Total Current Liabilities was $5,011 Mil.
Long-Term Debt was $7,018 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)|
|=||(3522 / 44638)||/||(3562 / 41057)|
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)|
|=||(555 / 41057)||/||(579 / 44638)|
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 - (5160 + 11965) / 21837)||/||(1 - (5145 + 10607) / 20267)|
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))|
|=||(391 / (391 + 10607))||/||(403 / (403 + 11965))|
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)|
|=||(340 / 44638)||/||(354 / 41057)|
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)|
|=||((7613 + 5568) / 21837)||/||((7018 + 5011) / 20267)|
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|
|=||(1303 - 91||-||1638)||/||21837|
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.
Plains All American Pipeline LP has a M-score of -2.50 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
Plains All American Pipeline LP Annual Data
Plains All American Pipeline LP Quarterly Data