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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 Procter & Gamble Co was -1.92. The lowest was -3.16. And the median was -2.63.
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 Procter & Gamble Co 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 * 0.8506||+||0.528 * 1.0123||+||0.404 * 0.9256||+||0.892 * 0.9869||+||0.115 * 0.9194|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9802||+||4.679 * -0.0465||-||0.327 * 1.0495|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $5,802 Mil.|
Revenue was 20161 + 20792 + 19018 + 20559 = $80,530 Mil.
Gross Profit was 10078 + 10240 + 9099 + 9958 = $39,375 Mil.
Total Current Assets was $33,178 Mil.
Total Assets was $136,263 Mil.
Property, Plant and Equipment(Net PPE) was $20,745 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,155 Mil.
Selling, General & Admin. Expense(SGA) was $24,930 Mil.
Total Current Liabilities was $34,152 Mil.
Long-Term Debt was $18,124 Mil.
Net Income was 2372 + 1990 + 2579 + 2609 = $9,550 Mil.
Non Operating Income was 19 + 21 + 138 + 20 = $198 Mil.
Cash Flow from Operations was 3435 + 3633 + 4506 + 4109 = $15,683 Mil.
|Accounts Receivable was $6,911 Mil.
Revenue was 21099 + 20830 + 19069 + 20598 = $81,596 Mil.
Gross Profit was 10625 + 10256 + 9252 + 10254 = $40,387 Mil.
Total Current Assets was $27,467 Mil.
Total Assets was $142,927 Mil.
Property, Plant and Equipment(Net PPE) was $22,152 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,060 Mil.
Selling, General & Admin. Expense(SGA) was $25,770 Mil.
Total Current Liabilities was $30,727 Mil.
Long-Term Debt was $21,517 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)|
|=||(5802 / 80530)||/||(6911 / 81596)|
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)|
|=||(10240 / 81596)||/||(10078 / 80530)|
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 - (33178 + 20745) / 136263)||/||(1 - (27467 + 22152) / 142927)|
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))|
|=||(3060 / (3060 + 22152))||/||(3155 / (3155 + 20745))|
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)|
|=||(24930 / 80530)||/||(25770 / 81596)|
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)|
|=||((18124 + 34152) / 136263)||/||((21517 + 30727) / 142927)|
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|
|=||(9550 - 198||-||15683)||/||136263|
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.
Procter & Gamble Co has a M-score of -2.89 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
Procter & Gamble Co Annual Data
Procter & Gamble Co Quarterly Data