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GuruFocus has detected 1 Warning Sign with Transocean Ltd $RIG.
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Transocean Ltd (NYSE:RIG)
Beneish M-Score
-3.10 (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.

Transocean Ltd has a M-score of -3.10 suggests that the company is not a manipulator.

RIG' s Beneish M-Score Range Over the Past 10 Years
Min: -4.66   Max: 2.47
Current: -3.1

-4.66
2.47

During the past 13 years, the highest Beneish M-Score of Transocean Ltd was 2.47. The lowest was -4.66. And the median was -2.52.


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 Transocean Ltd 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 * 1.101+0.528 * 1.092+0.404 * 0.8327+0.892 * 0.5634+0.115 * 1.0814
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.5902+4.679 * -0.0492-0.327 * 0.95
=-3.10

* 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 $833 Mil.
Revenue was 974 + 903 + 943 + 1341 = $4,161 Mil.
Gross Profit was 668 + 499 + 443 + 676 = $2,286 Mil.
Total Current Assets was $5,098 Mil.
Total Assets was $26,889 Mil.
Property, Plant and Equipment(Net PPE) was $21,093 Mil.
Depreciation, Depletion and Amortization(DDA) was $893 Mil.
Selling, General & Admin. Expense(SGA) was $172 Mil.
Total Current Liabilities was $1,985 Mil.
Long-Term Debt was $7,740 Mil.
Net Income was 223 + 229 + 77 + 249 = $778 Mil.
Non Operating Income was 34 + 117 + 41 + -1 = $191 Mil.
Cash Flow from Operations was 633 + 440 + 207 + 631 = $1,911 Mil.
Accounts Receivable was $1,343 Mil.
Revenue was 1851 + 1608 + 1884 + 2043 = $7,386 Mil.
Gross Profit was 1057 + 728 + 1687 + 959 = $4,431 Mil.
Total Current Assets was $4,798 Mil.
Total Assets was $26,431 Mil.
Property, Plant and Equipment(Net PPE) was $20,809 Mil.
Depreciation, Depletion and Amortization(DDA) was $956 Mil.
Selling, General & Admin. Expense(SGA) was $192 Mil.
Total Current Liabilities was $2,665 Mil.
Long-Term Debt was $7,397 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)
=(833 / 4161) / (1343 / 7386)
=0.20019226 / 0.18183049
=1.101

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)
=(4431 / 7386) / (2286 / 4161)
=0.59991877 / 0.54938717
=1.092

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 - (5098 + 21093) / 26889) / (1 - (4798 + 20809) / 26431)
=0.02595857 / 0.03117551
=0.8327

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
=4161 / 7386
=0.5634

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))
=(956 / (956 + 20809)) / (893 / (893 + 21093))
=0.04392373 / 0.04061676
=1.0814

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)
=(172 / 4161) / (192 / 7386)
=0.04133622 / 0.02599513
=1.5902

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)
=((7740 + 1985) / 26889) / ((7397 + 2665) / 26431)
=0.36167206 / 0.38068934
=0.95

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
=(778 - 191 - 1911) / 26889
=-0.0492

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.

Transocean Ltd has a M-score of -3.10 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.

Transocean Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.44750.65230.91331.12341.1010.84961.05290.99360.80141.101
GMI 0.78890.97651.04011.18322.03820.66730.86570.89610.74131.092
AQI 1.22360.9590.96241.02910.75820.72080.90540.33410.74660.8327
SGI 1.64271.98750.91180.68791.00981.11441.0340.99310.80410.5634
DEPI 2.69470.55780.70631.19280.64691.10981.18970.96331.12611.089
SGAI 0.96050.70511.15191.71111.15940.87870.98080.82391.02041.5902
LVGI 1.49480.80220.83390.95881.35951.00320.88581.04550.85050.95
TATA -0.0067-0.027-0.0664-0.0801-0.2135-0.084-0.0148-0.1428-0.0999-0.0492
M-score -1.51-2.01-2.95-3.00-3.11-3.17-2.52-3.47-3.48-3.10

Transocean Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.90680.99360.93720.90490.80480.80140.74080.76210.92461.101
GMI 0.97520.89680.9350.80090.76980.74130.72041.06461.04591.092
AQI 0.50270.33410.20940.18080.35060.74660.97341.08590.98560.8327
SGI 1.01290.99310.94520.90150.8470.80410.75190.680.64730.5634
DEPI 0.99430.96330.88260.87571.0131.1341.30821.36611.20871.0814
SGAI 0.88350.82390.85480.86370.94171.02041.12711.34791.41941.5902
LVGI 1.03111.04551.09561.03230.89620.85050.83520.82120.89640.95
TATA -0.1125-0.1428-0.2014-0.236-0.139-0.0999-0.0749-0.0454-0.0447-0.0492
M-score -3.29-3.47-3.90-4.20-3.78-3.48-3.38-3.09-3.07-3.10
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