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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 PPL Corp was -2.08. The lowest was -2.94. And the median was -2.52.
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 PPL Corp 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 * 0.7232||+||0.528 * 0.9301||+||0.404 * 0.5384||+||0.892 * 1.2528||+||0.115 * 1.1268|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.6512||+||4.679 * -0.052||-||0.327 * 1.133|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $732 Mil.|
Revenue was 1780 + 1878 + 1781 + 3165 = $8,604 Mil.
Gross Profit was 1433 + 1473 + 1397 + 2240 = $6,543 Mil.
Total Current Assets was $2,646 Mil.
Total Assets was $39,301 Mil.
Property, Plant and Equipment(Net PPE) was $30,382 Mil.
Depreciation, Depletion and Amortization(DDA) was $942 Mil.
Selling, General & Admin. Expense(SGA) was $124 Mil.
Total Current Liabilities was $3,876 Mil.
Long-Term Debt was $18,563 Mil.
Net Income was 399 + 393 + -757 + 647 = $682 Mil.
Non Operating Income was 43 + 75 + -102 + 94 = $110 Mil.
Cash Flow from Operations was 584 + 718 + 640 + 673 = $2,615 Mil.
|Accounts Receivable was $808 Mil.
Revenue was 1946 + 1879 + 1849 + 1194 = $6,868 Mil.
Gross Profit was 1488 + 1466 + 1446 + 458 = $4,858 Mil.
Total Current Assets was $6,026 Mil.
Total Assets was $48,606 Mil.
Property, Plant and Equipment(Net PPE) was $28,169 Mil.
Depreciation, Depletion and Amortization(DDA) was $988 Mil.
Selling, General & Admin. Expense(SGA) was $152 Mil.
Total Current Liabilities was $7,439 Mil.
Long-Term Debt was $17,054 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)|
|=||(732 / 8604)||/||(808 / 6868)|
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)|
|=||(1473 / 6868)||/||(1433 / 8604)|
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 - (2646 + 30382) / 39301)||/||(1 - (6026 + 28169) / 48606)|
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))|
|=||(988 / (988 + 28169))||/||(942 / (942 + 30382))|
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)|
|=||(124 / 8604)||/||(152 / 6868)|
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)|
|=||((18563 + 3876) / 39301)||/||((17054 + 7439) / 48606)|
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|
|=||(682 - 110||-||2615)||/||39301|
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.
PPL Corp has a M-score of -2.94 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
PPL Corp Annual Data
PPL Corp Quarterly Data