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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 Royal Dutch Shell PLC was -1.48. The lowest was -3.19. And the median was -2.77.
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 Royal Dutch Shell PLC 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 * 1.2192||+||0.528 * 1.0185||+||0.404 * 1.0225||+||0.892 * 0.6824||+||0.115 * 0.9166|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.251||+||4.679 * -0.0844||-||0.327 * 1.0591|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $49,130 Mil.|
Revenue was 69184 + 73950 + 68846 + 94166 = $306,146 Mil.
Gross Profit was 10153 + 15003 + 14766 + 13061 = $52,983 Mil.
Total Current Assets was $100,252 Mil.
Total Assets was $343,701 Mil.
Property, Plant and Equipment(Net PPE) was $181,681 Mil.
Depreciation, Depletion and Amortization(DDA) was $26,424 Mil.
Selling, General & Admin. Expense(SGA) was $12,292 Mil.
Total Current Liabilities was $76,669 Mil.
Long-Term Debt was $50,438 Mil.
Net Income was -7416 + 3986 + 4430 + 595 = $1,595 Mil.
Non Operating Income was -285 + -412 + -1735 + -974 = $-3,406 Mil.
Cash Flow from Operations was 11231 + 6050 + 7106 + 9608 = $33,995 Mil.
|Accounts Receivable was $59,056 Mil.
Revenue was 109825 + 115274 + 112079 + 111479 = $448,657 Mil.
Gross Profit was 17763 + 22139 + 21065 + 18114 = $79,081 Mil.
Total Current Assets was $105,401 Mil.
Total Assets was $359,411 Mil.
Property, Plant and Equipment(Net PPE) was $190,842 Mil.
Depreciation, Depletion and Amortization(DDA) was $25,137 Mil.
Selling, General & Admin. Expense(SGA) was $14,400 Mil.
Total Current Liabilities was $88,429 Mil.
Long-Term Debt was $37,065 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)|
|=||(49130 / 306146)||/||(59056 / 448657)|
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)|
|=||(15003 / 448657)||/||(10153 / 306146)|
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 - (100252 + 181681) / 343701)||/||(1 - (105401 + 190842) / 359411)|
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))|
|=||(25137 / (25137 + 190842))||/||(26424 / (26424 + 181681))|
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)|
|=||(12292 / 306146)||/||(14400 / 448657)|
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)|
|=||((50438 + 76669) / 343701)||/||((37065 + 88429) / 359411)|
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|
|=||(1595 - -3406||-||33995)||/||343701|
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.
Royal Dutch Shell PLC has a M-score of -3.01 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
Royal Dutch Shell PLC Annual Data
Royal Dutch Shell PLC Quarterly Data