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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 -2.15. 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 * 0.9397||+||0.528 * 0.9788||+||0.404 * 1.0436||+||0.892 * 1.0294||+||0.115 * 0.9544|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9881||+||4.679 * 0.0105||-||0.327 * 0.9703|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $2,962 Mil.|
Revenue was 3789 + 4064 + 3672 + 4116 = $15,641 Mil.
Gross Profit was 1708 + 1874 + 1659 + 1734 = $6,975 Mil.
Total Current Assets was $6,417 Mil.
Total Assets was $16,490 Mil.
Property, Plant and Equipment(Net PPE) was $2,863 Mil.
Depreciation, Depletion and Amortization(DDA) was $492 Mil.
Selling, General & Admin. Expense(SGA) was $3,738 Mil.
Total Current Liabilities was $4,460 Mil.
Long-Term Debt was $3,752 Mil.
Net Income was -184 + 370 + 347 + 314 = $847 Mil.
Non Operating Income was -958 + 19 + -6 + 17 = $-928 Mil.
Cash Flow from Operations was 776 + -84 + 59 + 851 = $1,602 Mil.
|Accounts Receivable was $3,062 Mil.
Revenue was 3725 + 4100 + 3662 + 3707 = $15,194 Mil.
Gross Profit was 1676 + 1817 + 1597 + 1542 = $6,632 Mil.
Total Current Assets was $7,292 Mil.
Total Assets was $17,574 Mil.
Property, Plant and Equipment(Net PPE) was $2,919 Mil.
Depreciation, Depletion and Amortization(DDA) was $475 Mil.
Selling, General & Admin. Expense(SGA) was $3,675 Mil.
Total Current Liabilities was $4,770 Mil.
Long-Term Debt was $4,250 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)|
|=||(2962 / 15641)||/||(3062 / 15194)|
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)|
|=||(6632 / 15194)||/||(6975 / 15641)|
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 - (6417 + 2863) / 16490)||/||(1 - (7292 + 2919) / 17574)|
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))|
|=||(475 / (475 + 2919))||/||(492 / (492 + 2863))|
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)|
|=||(3738 / 15641)||/||(3675 / 15194)|
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)|
|=||((3752 + 4460) / 16490)||/||((4250 + 4770) / 17574)|
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|
|=||(847 - -928||-||1602)||/||16490|
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 -2.45 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