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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 -2.01. The lowest was -2.89. 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 * 0.8972||+||0.528 * 0.9755||+||0.404 * 1.1941||+||0.892 * 1.0768||+||0.115 * 1.0181|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0012||+||4.679 * 0.0491||-||0.327 * 1.0119|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,366 Mil.|
Revenue was 3707 + 3935 + 4082 + 3636 = $15,360 Mil.
Gross Profit was 1542 + 1706 + 1776 + 1545 = $6,569 Mil.
Total Current Assets was $6,850 Mil.
Total Assets was $17,583 Mil.
Property, Plant and Equipment(Net PPE) was $3,092 Mil.
Depreciation, Depletion and Amortization(DDA) was $476 Mil.
Selling, General & Admin. Expense(SGA) was $3,758 Mil.
Total Current Liabilities was $4,876 Mil.
Long-Term Debt was $3,544 Mil.
Net Income was 83 + 371 + 386 + 1262 = $2,102 Mil.
Non Operating Income was -307 + 7 + 9 + 1 = $-290 Mil.
Cash Flow from Operations was 491 + 636 + 238 + 163 = $1,528 Mil.
|Accounts Receivable was $2,449 Mil.
Revenue was 3500 + 3774 + 3883 + 3108 = $14,265 Mil.
Gross Profit was 1472 + 1613 + 1620 + 1246 = $5,951 Mil.
Total Current Assets was $7,214 Mil.
Total Assets was $15,863 Mil.
Property, Plant and Equipment(Net PPE) was $2,876 Mil.
Depreciation, Depletion and Amortization(DDA) was $452 Mil.
Selling, General & Admin. Expense(SGA) was $3,486 Mil.
Total Current Liabilities was $4,135 Mil.
Long-Term Debt was $3,372 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)|
|=||(2366 / 15360)||/||(2449 / 14265)|
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)|
|=||(1706 / 14265)||/||(1542 / 15360)|
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 - (6850 + 3092) / 17583)||/||(1 - (7214 + 2876) / 15863)|
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))|
|=||(452 / (452 + 2876))||/||(476 / (476 + 3092))|
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)|
|=||(3758 / 15360)||/||(3486 / 14265)|
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)|
|=||((3544 + 4876) / 17583)||/||((3372 + 4135) / 15863)|
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|
|=||(2102 - -290||-||1528)||/||17583|
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 -2.21 signals that the company is likely to 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