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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 -2.53.
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 * 0.9233||+||0.528 * 1.0422||+||0.404 * 0.9856||+||0.892 * 0.6482||+||0.115 * 1.2232|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4252||+||4.679 * -0.0475||-||0.327 * 0.8964|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $887 Mil.|
Revenue was 903 + 943 + 1341 + 1851 = $5,038 Mil.
Gross Profit was 499 + 443 + 676 + 1057 = $2,675 Mil.
Total Current Assets was $4,491 Mil.
Total Assets was $26,167 Mil.
Property, Plant and Equipment(Net PPE) was $21,100 Mil.
Depreciation, Depletion and Amortization(DDA) was $865 Mil.
Selling, General & Admin. Expense(SGA) was $182 Mil.
Total Current Liabilities was $2,306 Mil.
Long-Term Debt was $7,191 Mil.
Net Income was 229 + 77 + 249 + 611 = $1,166 Mil.
Non Operating Income was 117 + 41 + -1 + 15 = $172 Mil.
Cash Flow from Operations was 440 + 207 + 631 + 960 = $2,238 Mil.
|Accounts Receivable was $1,482 Mil.
Revenue was 1608 + 1884 + 2043 + 2237 = $7,772 Mil.
Gross Profit was 728 + 1687 + 959 + 927 = $4,301 Mil.
Total Current Assets was $4,906 Mil.
Total Assets was $25,835 Mil.
Property, Plant and Equipment(Net PPE) was $20,352 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,030 Mil.
Selling, General & Admin. Expense(SGA) was $197 Mil.
Total Current Liabilities was $1,830 Mil.
Long-Term Debt was $8,630 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)|
|=||(887 / 5038)||/||(1482 / 7772)|
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)|
|=||(4301 / 7772)||/||(2675 / 5038)|
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 - (4491 + 21100) / 26167)||/||(1 - (4906 + 20352) / 25835)|
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))|
|=||(1030 / (1030 + 20352))||/||(865 / (865 + 21100))|
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)|
|=||(182 / 5038)||/||(197 / 7772)|
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)|
|=||((7191 + 2306) / 26167)||/||((8630 + 1830) / 25835)|
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|
|=||(1166 - 172||-||2238)||/||26167|
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 -3.08 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