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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 0.97. The lowest was -4.66. And the median was -2.51.
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|
|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
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)|
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)|
|=||(4431 / 7386)||/||(2286 / 4161)|
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 - (5098 + 21093) / 26889)||/||(1 - (4798 + 20809) / 26431)|
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))|
|=||(956 / (956 + 20809))||/||(893 / (893 + 21093))|
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)|
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)|
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|
|=||(778 - 191||-||1911)||/||26889|
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.
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