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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.
Pentair PLC has a M-score of -2.67 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Pentair PLC was -1.26. The lowest was -3.17. And the median was -2.49.
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 Pentair 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 * 0.6565||+||0.528 * 0.834||+||0.404 * 1.0086||+||0.892 * 1.3934||+||0.115 * 0.7951|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7758||+||4.679 * -0.0259||-||0.327 * 1.0907|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $1,411 Mil.|
Revenue was 1725.2 + 1916.7 + 1824.8 + 1963.7 = $7,430 Mil.
Gross Profit was 578.3 + 644.1 + 637.6 + 667.4 = $2,527 Mil.
Total Current Assets was $3,305 Mil.
Total Assets was $11,767 Mil.
Property, Plant and Equipment(Net PPE) was $1,162 Mil.
Depreciation, Depletion and Amortization(DDA) was $273 Mil.
Selling, General & Admin. Expense(SGA) was $1,515 Mil.
Total Current Liabilities was $1,528 Mil.
Long-Term Debt was $2,934 Mil.
Net Income was 118.6 + 158.2 + 172.8 + 154.1 = $604 Mil.
Non Operating Income was 7.6 + 3.1 + 0.6 + 0.9 = $12 Mil.
Cash Flow from Operations was 0.6 + 285.5 + 243.7 + 366.2 = $896 Mil.
|Accounts Receivable was $1,542 Mil.
Revenue was 1774.5 + 1750.9 + 865.5 + 941.5 = $5,332 Mil.
Gross Profit was 523.8 + 398.7 + 278.1 + 312.1 = $1,513 Mil.
Total Current Assets was $3,290 Mil.
Total Assets was $11,721 Mil.
Property, Plant and Equipment(Net PPE) was $1,222 Mil.
Depreciation, Depletion and Amortization(DDA) was $218 Mil.
Selling, General & Admin. Expense(SGA) was $1,401 Mil.
Total Current Liabilities was $1,483 Mil.
Long-Term Debt was $2,592 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)|
|=||(1410.7 / 7430.4)||/||(1542 / 5332.4)|
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)|
|=||(644.1 / 5332.4)||/||(578.3 / 7430.4)|
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 - (3305.3 + 1162) / 11766.5)||/||(1 - (3290 + 1222) / 11721)|
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))|
|=||(217.7 / (217.7 + 1222))||/||(272.9 / (272.9 + 1162))|
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)|
|=||(1514.5 / 7430.4)||/||(1401 / 5332.4)|
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)|
|=||((2933.8 + 1528.1) / 11766.5)||/||((2592 + 1483) / 11721)|
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|
|=||(603.7 - 12.2||-||896)||/||11766.5|
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.
Pentair PLC has a M-score of -2.67 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
Pentair PLC Annual Data
Pentair PLC Quarterly Data