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GuruFocus has detected 7 Warning Signs with Royal Dutch Shell PLC $RDS.A.
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Royal Dutch Shell PLC (NYSE:RDS.A)
Beneish M-Score
-2.90 (As of Today)

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.

Royal Dutch Shell PLC has a M-score of -3.06 suggests that the company is not a manipulator.

RDS.A' s Beneish M-Score Range Over the Past 10 Years
Min: -3.17   Max: -1.53
Current: -2.9

-3.17
-1.53

During the past 13 years, the highest Beneish M-Score of Royal Dutch Shell PLC was -1.53. The lowest was -3.17. And the median was -2.84.


Definition

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 * 0.6381+0.528 * 0.889+0.404 * 1.1458+0.892 * 0.882+0.115 * 1.3317
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1476+4.679 * -0.029-0.327 * 1.0477
=-3.06

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $25,766 Mil.
Revenue was 67092 + 62938 + 60271 + 49732 = $240,033 Mil.
Gross Profit was 14861 + 12650 + 11833 + 9681 = $49,025 Mil.
Total Current Assets was $86,569 Mil.
Total Assets was $411,275 Mil.
Property, Plant and Equipment(Net PPE) was $236,098 Mil.
Depreciation, Depletion and Amortization(DDA) was $24,993 Mil.
Selling, General & Admin. Expense(SGA) was $12,101 Mil.
Total Current Liabilities was $73,825 Mil.
Long-Term Debt was $82,992 Mil.
Net Income was 1541 + 1375 + 1175 + 484 = $4,575 Mil.
Non Operating Income was -2539 + -255 + -910 + -389 = $-4,093 Mil.
Cash Flow from Operations was 9170 + 8492 + 2292 + 661 = $20,615 Mil.
Accounts Receivable was $45,784 Mil.
Revenue was 60176 + 69184 + 73950 + 68846 = $272,156 Mil.
Gross Profit was 9495 + 10153 + 15003 + 14766 = $49,417 Mil.
Total Current Assets was $93,358 Mil.
Total Assets was $340,157 Mil.
Property, Plant and Equipment(Net PPE) was $182,838 Mil.
Depreciation, Depletion and Amortization(DDA) was $26,714 Mil.
Selling, General & Admin. Expense(SGA) was $11,956 Mil.
Total Current Liabilities was $70,948 Mil.
Long-Term Debt was $52,849 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(25766 / 240033) / (45784 / 272156)
=0.10734357 / 0.16822705
=0.6381

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(49417 / 272156) / (49025 / 240033)
=0.18157601 / 0.20424275
=0.889

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (86569 + 236098) / 411275) / (1 - (93358 + 182838) / 340157)
=0.21544709 / 0.18803376
=1.1458

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=240033 / 272156
=0.882

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))
=(26714 / (26714 + 182838)) / (24993 / (24993 + 236098))
=0.12748148 / 0.09572525
=1.3317

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)
=(12101 / 240033) / (11956 / 272156)
=0.0504139 / 0.04393069
=1.1476

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)
=((82992 + 73825) / 411275) / ((52849 + 70948) / 340157)
=0.38129475 / 0.36394077
=1.0477

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(4575 - -4093 - 20615) / 411275
=-0.029

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 -3.06 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Royal Dutch Shell PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.22441.46491.19440.89090.88530.50871.0190.77381.15031.4177
GMI 1.05490.93340.92961.02641.02791.0191.04890.98910.94520.889
AQI 1.08210.97671.15180.94620.93660.92890.96440.98961.09091.1458
SGI 1.11581.32370.60541.32621.28120.99420.95410.93850.63090.882
DEPI 0.96641.05761.09771.00471.23111.02340.77580.89260.88571.3317
SGAI 0.89650.76841.70290.67170.72181.01321.06331.0141.35691.1476
LVGI 1.0781.06640.9371.05680.9430.91840.99970.97391.03191.0477
TATA -0.0413-0.0443-0.024-0.02190.0012-0.0395-0.0643-0.0708-0.0685-0.029
M-score -2.31-1.99-2.83-2.36-2.25-3.11-2.83-3.09-3.07-2.34

Royal Dutch Shell PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.99040.9790.95431.02921.21921.2411.56761.40951.24440.6381
GMI 0.98640.98910.96261.00571.01850.94520.99611.01610.92410.889
AQI 1.01480.98960.96891.00331.02251.09091.20971.2021.21311.1458
SGI 0.95310.93850.85080.75870.68240.63090.6520.69020.76150.882
DEPI 0.82130.89261.09621.25720.91660.88570.99430.82441.41761.3317
SGAI 1.04111.0141.08661.14941.2511.35691.39021.40031.31191.1476
LVGI 0.98460.97390.92470.96471.05911.03191.07961.07971.04111.0477
TATA -0.0613-0.0738-0.0523-0.052-0.0844-0.0711-0.0554-0.0518-0.0241-0.029
M-score -2.84-2.92-2.91-2.89-3.01-3.00-2.54-2.65-2.55-3.06
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