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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 -4.85. And the median was -2.52.
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 * 0.8004||+||0.528 * 0.7384||+||0.404 * 0.8964||+||0.892 * 0.8051||+||0.115 * 1.1388|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0245||+||4.679 * -0.1031||-||0.327 * 0.8467|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|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 $4,785 Mil.
Total Assets was $26,329 Mil.
Property, Plant and Equipment(Net PPE) was $20,818 Mil.
Depreciation, Depletion and Amortization(DDA) was $948 Mil.
Selling, General & Admin. Expense(SGA) was $193 Mil.
Total Current Liabilities was $2,669 Mil.
Long-Term Debt was $7,397 Mil.
Net Income was 611 + 321 + 342 + -483 = $791 Mil.
Non Operating Income was 15 + 3 + -5 + 47 = $60 Mil.
Cash Flow from Operations was 960 + 648 + 1311 + 526 = $3,445 Mil.
|Accounts Receivable was $2,084 Mil.
Revenue was 2237 + 2270 + 2328 + 2339 = $9,174 Mil.
Gross Profit was 927 + 952 + 1115 + 1070 = $4,064 Mil.
Total Current Assets was $6,001 Mil.
Total Assets was $28,413 Mil.
Property, Plant and Equipment(Net PPE) was $21,538 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,124 Mil.
Selling, General & Admin. Expense(SGA) was $234 Mil.
Total Current Liabilities was $3,770 Mil.
Long-Term Debt was $9,059 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)|
|=||(1343 / 7386)||/||(2084 / 9174)|
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)|
|=||(728 / 9174)||/||(1057 / 7386)|
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 - (4785 + 20818) / 26329)||/||(1 - (6001 + 21538) / 28413)|
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))|
|=||(1124 / (1124 + 21538))||/||(948 / (948 + 20818))|
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)|
|=||(193 / 7386)||/||(234 / 9174)|
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)|
|=||((7397 + 2669) / 26329)||/||((9059 + 3770) / 28413)|
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|
|=||(791 - 60||-||3445)||/||26329|
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 -3.44 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