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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 PPG Industries Inc was -2.02. The lowest was -3.16. And the median was -2.57.
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 PPG Industries Inc 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 * 0.952||+||0.528 * 0.9651||+||0.404 * 1.0043||+||0.892 * 0.9935||+||0.115 * 1.0009|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.992||+||4.679 * -0.0116||-||0.327 * 0.9924|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $3,108 Mil.|
Revenue was 4064 + 3672 + 3696 + 3872 = $15,304 Mil.
Gross Profit was 1874 + 1659 + 1603 + 1722 = $6,858 Mil.
Total Current Assets was $7,107 Mil.
Total Assets was $17,248 Mil.
Property, Plant and Equipment(Net PPE) was $2,950 Mil.
Depreciation, Depletion and Amortization(DDA) was $492 Mil.
Selling, General & Admin. Expense(SGA) was $3,687 Mil.
Total Current Liabilities was $4,375 Mil.
Long-Term Debt was $4,426 Mil.
Net Income was 370 + 347 + 314 + 433 = $1,464 Mil.
Non Operating Income was 19 + -6 + 11 + 14 = $38 Mil.
Cash Flow from Operations was -84 + 59 + 851 + 800 = $1,626 Mil.
|Accounts Receivable was $3,286 Mil.
Revenue was 4100 + 3662 + 3707 + 3935 = $15,404 Mil.
Gross Profit was 1817 + 1597 + 1542 + 1706 = $6,662 Mil.
Total Current Assets was $7,374 Mil.
Total Assets was $17,596 Mil.
Property, Plant and Equipment(Net PPE) was $2,917 Mil.
Depreciation, Depletion and Amortization(DDA) was $487 Mil.
Selling, General & Admin. Expense(SGA) was $3,741 Mil.
Total Current Liabilities was $4,825 Mil.
Long-Term Debt was $4,222 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)|
|=||(3108 / 15304)||/||(3286 / 15404)|
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)|
|=||(6662 / 15404)||/||(6858 / 15304)|
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 - (7107 + 2950) / 17248)||/||(1 - (7374 + 2917) / 17596)|
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))|
|=||(487 / (487 + 2917))||/||(492 / (492 + 2950))|
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)|
|=||(3687 / 15304)||/||(3741 / 15404)|
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)|
|=||((4426 + 4375) / 17248)||/||((4222 + 4825) / 17596)|
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|
|=||(1464 - 38||-||1626)||/||17248|
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.
PPG Industries Inc has a M-score of -2.60 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
PPG Industries Inc Annual Data
PPG Industries Inc Quarterly Data