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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 -1.97. The lowest was -2.93. 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 * 0.6507||+||0.528 * 1.0912||+||0.404 * 0.9622||+||0.892 * 1.0436||+||0.115 * 1.1783|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7817||+||4.679 * -0.0509||-||0.327 * 1.0517|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $713 Mil.|
Revenue was 1878 + 1781 + 3165 + 4023 = $10,847 Mil.
Gross Profit was 1473 + 1397 + 2240 + 2102 = $7,212 Mil.
Total Current Assets was $2,990 Mil.
Total Assets was $39,246 Mil.
Property, Plant and Equipment(Net PPE) was $29,962 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,071 Mil.
Selling, General & Admin. Expense(SGA) was $124 Mil.
Total Current Liabilities was $4,468 Mil.
Long-Term Debt was $17,745 Mil.
Net Income was 393 + -757 + 647 + 695 = $978 Mil.
Non Operating Income was 75 + -102 + 94 + 103 = $170 Mil.
Cash Flow from Operations was 718 + 640 + 673 + 775 = $2,806 Mil.
|Accounts Receivable was $1,050 Mil.
Revenue was 3449 + 2874 + 1223 + 2848 = $10,394 Mil.
Gross Profit was 1952 + 1864 + 1821 + 1904 = $7,541 Mil.
Total Current Assets was $5,760 Mil.
Total Assets was $48,189 Mil.
Property, Plant and Equipment(Net PPE) was $34,397 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,458 Mil.
Selling, General & Admin. Expense(SGA) was $152 Mil.
Total Current Liabilities was $5,412 Mil.
Long-Term Debt was $20,522 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)|
|=||(713 / 10847)||/||(1050 / 10394)|
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)|
|=||(1397 / 10394)||/||(1473 / 10847)|
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 - (2990 + 29962) / 39246)||/||(1 - (5760 + 34397) / 48189)|
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))|
|=||(1458 / (1458 + 34397))||/||(1071 / (1071 + 29962))|
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 / 10847)||/||(152 / 10394)|
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)|
|=||((17745 + 4468) / 39246)||/||((20522 + 5412) / 48189)|
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|
|=||(978 - 170||-||2806)||/||39246|
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 -2.93 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