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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 -1.53. The lowest was -3.59. And the median was -2.60.
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 * 0.5586||+||0.528 * 0.9452||+||0.404 * 1.0909||+||0.892 * 0.6309||+||0.115 * 0.8857|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3569||+||4.679 * -0.0711||-||0.327 * 1.0319|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $20,607 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.
Net Income was 939 + -7416 + 3986 + 4430 = $1,939 Mil.
Non Operating Income was -1237 + -285 + -412 + -1735 = $-3,669 Mil.
Cash Flow from Operations was 5423 + 11231 + 6050 + 7106 = $29,810 Mil.
|Accounts Receivable was $58,470 Mil.
Revenue was 94166 + 109825 + 115274 + 112079 = $431,344 Mil.
Gross Profit was 13061 + 17763 + 22139 + 21065 = $74,028 Mil.
Total Current Assets was $99,778 Mil.
Total Assets was $353,116 Mil.
Property, Plant and Equipment(Net PPE) was $192,472 Mil.
Depreciation, Depletion and Amortization(DDA) was $24,499 Mil.
Selling, General & Admin. Expense(SGA) was $13,965 Mil.
Total Current Liabilities was $86,212 Mil.
Long-Term Debt was $38,332 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)|
|=||(20607 / 272156)||/||(58470 / 431344)|
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)|
|=||(10153 / 431344)||/||(9495 / 272156)|
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 - (93358 + 182838) / 340157)||/||(1 - (99778 + 192472) / 353116)|
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))|
|=||(24499 / (24499 + 192472))||/||(26714 / (26714 + 182838))|
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)|
|=||(11956 / 272156)||/||(13965 / 431344)|
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)|
|=||((52849 + 70948) / 340157)||/||((38332 + 86212) / 353116)|
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|
|=||(1939 - -3669||-||29810)||/||340157|
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 -3.63 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