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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 Transocean Ltd was 2.47. The lowest was -4.21. And the median was -2.53.
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 * 0.9061||+||0.528 * 0.8036||+||0.404 * 0.1808||+||0.892 * 0.9003||+||0.115 * 0.8825|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8649||+||4.679 * -0.2388||-||0.327 * 1.0323|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $1,806 Mil.|
Revenue was 1884 + 2043 + 2237 + 2270 = $8,434 Mil.
Gross Profit was 1687 + 959 + 927 + 952 = $4,525 Mil.
Total Current Assets was $6,719 Mil.
Total Assets was $26,973 Mil.
Property, Plant and Equipment(Net PPE) was $19,657 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,104 Mil.
Selling, General & Admin. Expense(SGA) was $204 Mil.
Total Current Liabilities was $2,902 Mil.
Long-Term Debt was $8,989 Mil.
Net Income was 342 + -483 + -739 + -2217 = $-3,097 Mil.
Non Operating Income was -5 + 47 + 10 + 6 = $58 Mil.
Cash Flow from Operations was 1311 + 526 + 566 + 882 = $3,285 Mil.
|Accounts Receivable was $2,214 Mil.
Revenue was 2328 + 2339 + 2252 + 2449 = $9,368 Mil.
Gross Profit was 1115 + 1070 + 791 + 1063 = $4,039 Mil.
Total Current Assets was $5,760 Mil.
Total Assets was $32,067 Mil.
Property, Plant and Equipment(Net PPE) was $22,381 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,102 Mil.
Selling, General & Admin. Expense(SGA) was $262 Mil.
Total Current Liabilities was $3,397 Mil.
Long-Term Debt was $10,298 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)|
|=||(1806 / 8434)||/||(2214 / 9368)|
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)|
|=||(959 / 9368)||/||(1687 / 8434)|
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 - (6719 + 19657) / 26973)||/||(1 - (5760 + 22381) / 32067)|
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))|
|=||(1102 / (1102 + 22381))||/||(1104 / (1104 + 19657))|
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)|
|=||(204 / 8434)||/||(262 / 9368)|
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)|
|=||((8989 + 2902) / 26973)||/||((10298 + 3397) / 32067)|
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|
|=||(-3097 - 58||-||3285)||/||26973|
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 -4.21 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
Transocean Ltd Annual Data
Transocean Ltd Quarterly Data