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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 -2.64.
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 * 1.0468||+||0.528 * 0.9707||+||0.404 * 1.0017||+||0.892 * 0.9531||+||0.115 * 1.0092|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0052||+||4.679 * -0.0365||-||0.327 * 1.0498|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $4,713 Mil.|
Revenue was 16518 + 16102 + 15755 + 16915 = $65,290 Mil.
Gross Profit was 8416 + 7720 + 7840 + 8455 = $32,431 Mil.
Total Current Assets was $35,171 Mil.
Total Assets was $129,043 Mil.
Property, Plant and Equipment(Net PPE) was $19,310 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,075 Mil.
Selling, General & Admin. Expense(SGA) was $18,987 Mil.
Total Current Liabilities was $32,401 Mil.
Long-Term Debt was $18,910 Mil.
Net Income was 2714 + 1951 + 2750 + 3206 = $10,621 Mil.
Non Operating Income was 63 + 287 + 21 + 35 = $406 Mil.
Cash Flow from Operations was 3025 + 4139 + 3278 + 4480 = $14,922 Mil.
|Accounts Receivable was $4,724 Mil.
Revenue was 16527 + 16553 + 16930 + 18495 = $68,505 Mil.
Gross Profit was 8375 + 7716 + 8003 + 8937 = $33,031 Mil.
Total Current Assets was $35,620 Mil.
Total Assets was $129,265 Mil.
Property, Plant and Equipment(Net PPE) was $19,081 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,071 Mil.
Selling, General & Admin. Expense(SGA) was $19,819 Mil.
Total Current Liabilities was $31,567 Mil.
Long-Term Debt was $17,394 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)|
|=||(4713 / 65290)||/||(4724 / 68505)|
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)|
|=||(33031 / 68505)||/||(32431 / 65290)|
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 - (35171 + 19310) / 129043)||/||(1 - (35620 + 19081) / 129265)|
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))|
|=||(3071 / (3071 + 19081))||/||(3075 / (3075 + 19310))|
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)|
|=||(18987 / 65290)||/||(19819 / 68505)|
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)|
|=||((18910 + 32401) / 129043)||/||((17394 + 31567) / 129265)|
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|
|=||(10621 - 406||-||14922)||/||129043|
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 -2.68 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
Procter & Gamble Co Annual Data
Procter & Gamble Co Quarterly Data