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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 -2.58.
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 * 0.9844||+||0.528 * 0.9941||+||0.404 * 0.9503||+||0.892 * 0.9999||+||0.115 * 0.9425|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0125||+||4.679 * 0.0469||-||0.327 * 0.9874|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Mar17) TTM:||Last Year (Mar16) TTM:|
|Accounts Receivable was $3,057 Mil.|
Revenue was 3569 + 3497 + 3789 + 4064 = $14,919 Mil.
Gross Profit was 1600 + 1529 + 1708 + 1874 = $6,711 Mil.
Total Current Assets was $6,646 Mil.
Total Assets was $16,154 Mil.
Property, Plant and Equipment(Net PPE) was $2,806 Mil.
Depreciation, Depletion and Amortization(DDA) was $461 Mil.
Selling, General & Admin. Expense(SGA) was $3,689 Mil.
Total Current Liabilities was $4,273 Mil.
Long-Term Debt was $3,817 Mil.
Net Income was 334 + 344 + -184 + 370 = $864 Mil.
Non Operating Income was 11 + -221 + -958 + 19 = $-1,149 Mil.
Cash Flow from Operations was 9 + 574 + 776 + -104 = $1,255 Mil.
|Accounts Receivable was $3,106 Mil.
Revenue was 3544 + 3552 + 3725 + 4100 = $14,921 Mil.
Gross Profit was 1624 + 1555 + 1676 + 1817 = $6,672 Mil.
Total Current Assets was $6,718 Mil.
Total Assets was $17,315 Mil.
Property, Plant and Equipment(Net PPE) was $3,038 Mil.
Depreciation, Depletion and Amortization(DDA) was $466 Mil.
Selling, General & Admin. Expense(SGA) was $3,644 Mil.
Total Current Liabilities was $4,556 Mil.
Long-Term Debt was $4,226 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)|
|=||(3057 / 14919)||/||(3106 / 14921)|
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)|
|=||(6672 / 14921)||/||(6711 / 14919)|
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 - (6646 + 2806) / 16154)||/||(1 - (6718 + 3038) / 17315)|
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))|
|=||(466 / (466 + 3038))||/||(461 / (461 + 2806))|
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)|
|=||(3689 / 14919)||/||(3644 / 14921)|
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)|
|=||((3817 + 4273) / 16154)||/||((4226 + 4556) / 17315)|
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|
|=||(864 - -1149||-||1255)||/||16154|
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 -2.30 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