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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 -2.72 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Pentair PLC was -1.23. The lowest was -2.94. And the median was -2.51.
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 * 0.779||+||0.528 * 0.8609||+||0.404 * 1.0092||+||0.892 * 1.161||+||0.115 * 0.9818|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7929||+||4.679 * -0.0297||-||0.327 * 1.0251|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $1,302 Mil.|
Revenue was 1910.8 + 1725.2 + 1916.7 + 1824.8 = $7,378 Mil.
Gross Profit was 658.9 + 578.3 + 644.1 + 637.6 = $2,519 Mil.
Total Current Assets was $3,166 Mil.
Total Assets was $11,617 Mil.
Property, Plant and Equipment(Net PPE) was $1,152 Mil.
Depreciation, Depletion and Amortization(DDA) was $264 Mil.
Selling, General & Admin. Expense(SGA) was $1,505 Mil.
Total Current Liabilities was $1,777 Mil.
Long-Term Debt was $2,739 Mil.
Net Income was 161.5 + 118.6 + 158.2 + 172.8 = $611 Mil.
Non Operating Income was 0.2 + 7.6 + 3.1 + 0.6 = $12 Mil.
Cash Flow from Operations was 414.4 + 0.6 + 285.5 + 243.7 = $944 Mil.
|Accounts Receivable was $1,440 Mil.
Revenue was 1963.7 + 1774.5 + 1750.932 + 865.512 = $6,355 Mil.
Gross Profit was 667.4 + 523.8 + 398.668 + 278.077 = $1,868 Mil.
Total Current Assets was $3,217 Mil.
Total Assets was $11,667 Mil.
Property, Plant and Equipment(Net PPE) was $1,186 Mil.
Depreciation, Depletion and Amortization(DDA) was $266 Mil.
Selling, General & Admin. Expense(SGA) was $1,635 Mil.
Total Current Liabilities was $1,687 Mil.
Long-Term Debt was $2,737 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)|
|=||(1302.2 / 7377.5)||/||(1439.9 / 6354.644)|
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)|
|=||(578.3 / 6354.644)||/||(658.9 / 7377.5)|
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 - (3165.9 + 1151.6) / 11616.8)||/||(1 - (3216.5 + 1186.1) / 11666.6)|
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))|
|=||(265.849 / (265.849 + 1186.1))||/||(264 / (264 + 1151.6))|
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)|
|=||(1505.4 / 7377.5)||/||(1635.381 / 6354.644)|
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)|
|=||((2739 + 1777.1) / 11616.8)||/||((2737.4 + 1686.8) / 11666.6)|
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|
|=||(611.1 - 11.5||-||944.2)||/||11616.8|
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 -2.72 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