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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 * 0.7399||+||0.528 * 0.7175||+||0.404 * 0.9734||+||0.892 * 0.7529||+||0.115 * 1.3085|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1317||+||4.679 * -0.0777||-||0.327 * 0.8352|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,094 Mil.|
Revenue was 1341 + 1851 + 1608 + 1884 = $6,684 Mil.
Gross Profit was 676 + 1057 + 728 + 1687 = $4,148 Mil.
Total Current Assets was $4,700 Mil.
Total Assets was $26,245 Mil.
Property, Plant and Equipment(Net PPE) was $20,889 Mil.
Depreciation, Depletion and Amortization(DDA) was $878 Mil.
Selling, General & Admin. Expense(SGA) was $190 Mil.
Total Current Liabilities was $2,588 Mil.
Long-Term Debt was $7,253 Mil.
Net Income was 249 + 611 + 321 + 342 = $1,523 Mil.
Non Operating Income was -1 + 15 + 3 + -5 = $12 Mil.
Cash Flow from Operations was 631 + 960 + 648 + 1311 = $3,550 Mil.
|Accounts Receivable was $1,964 Mil.
Revenue was 2043 + 2237 + 2270 + 2328 = $8,878 Mil.
Gross Profit was 959 + 927 + 952 + 1115 = $3,953 Mil.
Total Current Assets was $5,843 Mil.
Total Assets was $27,105 Mil.
Property, Plant and Equipment(Net PPE) was $20,566 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,146 Mil.
Selling, General & Admin. Expense(SGA) was $223 Mil.
Total Current Liabilities was $3,173 Mil.
Long-Term Debt was $8,996 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)|
|=||(1094 / 6684)||/||(1964 / 8878)|
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)|
|=||(1057 / 8878)||/||(676 / 6684)|
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 - (4700 + 20889) / 26245)||/||(1 - (5843 + 20566) / 27105)|
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))|
|=||(1146 / (1146 + 20566))||/||(878 / (878 + 20889))|
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)|
|=||(190 / 6684)||/||(223 / 8878)|
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)|
|=||((7253 + 2588) / 26245)||/||((8996 + 3173) / 27105)|
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|
|=||(1523 - 12||-||3550)||/||26245|
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 -3.40 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