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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 Pentair PLC was -1.23. The lowest was -3.08. And the median was -2.55.
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 * 0.9385||+||0.528 * 1.0262||+||0.404 * 1.0675||+||0.892 * 0.9887||+||0.115 * 0.9121|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0156||+||4.679 * -0.0924||-||0.327 * 1.1372|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,086 Mil.|
Revenue was 1733.3 + 1575.5 + 1760.7 + 1552.1 = $6,622 Mil.
Gross Profit was 599.2 + 535.4 + 569.3 + 540.1 = $2,244 Mil.
Total Current Assets was $2,793 Mil.
Total Assets was $11,744 Mil.
Property, Plant and Equipment(Net PPE) was $938 Mil.
Depreciation, Depletion and Amortization(DDA) was $282 Mil.
Selling, General & Admin. Expense(SGA) was $1,386 Mil.
Total Current Liabilities was $1,416 Mil.
Long-Term Debt was $4,552 Mil.
Net Income was 142.8 + 107.4 + -453.3 + 115.2 = $-88 Mil.
Non Operating Income was 1 + 0.9 + 133.8 + -61.7 = $74 Mil.
Cash Flow from Operations was 384.5 + -15 + 343.4 + 210.4 = $923 Mil.
|Accounts Receivable was $1,171 Mil.
Revenue was 1661.2 + 1475 + 1802.5 + 1758.4 = $6,697 Mil.
Gross Profit was 566.2 + 510.2 + 627.9 + 624.7 = $2,329 Mil.
Total Current Assets was $2,903 Mil.
Total Assets was $10,565 Mil.
Property, Plant and Equipment(Net PPE) was $909 Mil.
Depreciation, Depletion and Amortization(DDA) was $243 Mil.
Selling, General & Admin. Expense(SGA) was $1,380 Mil.
Total Current Liabilities was $1,460 Mil.
Long-Term Debt was $3,261 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)|
|=||(1086.2 / 6621.6)||/||(1170.6 / 6697.1)|
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)|
|=||(2329 / 6697.1)||/||(2244 / 6621.6)|
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 - (2792.8 + 937.6) / 11743.8)||/||(1 - (2902.9 + 908.5) / 10564.7)|
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))|
|=||(242.8 / (242.8 + 908.5))||/||(282 / (282 + 937.6))|
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)|
|=||(1385.8 / 6621.6)||/||(1380.1 / 6697.1)|
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)|
|=||((4551.7 + 1415.9) / 11743.8)||/||((3260.9 + 1460) / 10564.7)|
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|
|=||(-87.9 - 74||-||923.3)||/||11743.8|
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 -3.00 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