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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 -3.20. And the median was -2.70.
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 * 0.9543||+||0.528 * 0.9626||+||0.404 * 0.9689||+||0.892 * 0.8508||+||0.115 * 1.0962|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0866||+||4.679 * -0.0523||-||0.327 * 0.9247|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $51,696 Mil.|
Revenue was 68846 + 94166 + 109825 + 115274 = $388,111 Mil.
Gross Profit was 14766 + 13061 + 17763 + 22139 = $67,729 Mil.
Total Current Assets was $91,531 Mil.
Total Assets was $341,832 Mil.
Property, Plant and Equipment(Net PPE) was $189,263 Mil.
Depreciation, Depletion and Amortization(DDA) was $21,679 Mil.
Selling, General & Admin. Expense(SGA) was $13,425 Mil.
Total Current Liabilities was $79,502 Mil.
Long-Term Debt was $35,703 Mil.
Net Income was 4430 + 595 + 4463 + 5307 = $14,795 Mil.
Non Operating Income was -1735 + -974 + -462 + -2336 = $-5,507 Mil.
Cash Flow from Operations was 7106 + 9608 + 12811 + 8641 = $38,166 Mil.
|Accounts Receivable was $63,670 Mil.
Revenue was 112079 + 111479 + 118258 + 114348 = $456,164 Mil.
Gross Profit was 21065 + 18114 + 19000 + 18447 = $76,626 Mil.
Total Current Assets was $104,423 Mil.
Total Assets was $366,593 Mil.
Property, Plant and Equipment(Net PPE) was $194,608 Mil.
Depreciation, Depletion and Amortization(DDA) was $24,708 Mil.
Selling, General & Admin. Expense(SGA) was $14,522 Mil.
Total Current Liabilities was $92,381 Mil.
Long-Term Debt was $41,236 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)|
|=||(51696 / 388111)||/||(63670 / 456164)|
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)|
|=||(13061 / 456164)||/||(14766 / 388111)|
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 - (91531 + 189263) / 341832)||/||(1 - (104423 + 194608) / 366593)|
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))|
|=||(24708 / (24708 + 194608))||/||(21679 / (21679 + 189263))|
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)|
|=||(13425 / 388111)||/||(14522 / 456164)|
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)|
|=||((35703 + 79502) / 341832)||/||((41236 + 92381) / 366593)|
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|
|=||(14795 - -5507||-||38166)||/||341832|
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 -2.91 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