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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.
Shire PLC has a M-score of -2.66 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Shire PLC was -2.13. The lowest was -4.35. And the median was -2.75.
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 Shire PLC 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 * 1.0701||+||0.528 * 1.0076||+||0.404 * 0.8774||+||0.892 * 1.0899||+||0.115 * 0.915|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7778||+||4.679 * -0.0954||-||0.327 * 0.5789|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $961 Mil.|
Revenue was 1261.3 + 1236.6 + 1274.5 + 1161.9 = $4,934 Mil.
Gross Profit was 1119.2 + 1039.5 + 1098.8 + 1006 = $4,264 Mil.
Total Current Assets was $4,288 Mil.
Total Assets was $8,323 Mil.
Property, Plant and Equipment(Net PPE) was $892 Mil.
Depreciation, Depletion and Amortization(DDA) was $324 Mil.
Selling, General & Admin. Expense(SGA) was $1,651 Mil.
Total Current Liabilities was $1,808 Mil.
Long-Term Debt was $0 Mil.
Net Income was 64 + 278.2 + 258.1 + 64.8 = $665 Mil.
Non Operating Income was -2 + 0.6 + -1.4 + -1.1 = $-4 Mil.
Cash Flow from Operations was 610.3 + 433.7 + 258.6 + 160.4 = $1,463 Mil.
|Accounts Receivable was $824 Mil.
Revenue was 1047.4 + 1100.4 + 1207.8 + 1171.8 = $4,527 Mil.
Gross Profit was 940.4 + 932.5 + 1055.3 + 1013.4 = $3,942 Mil.
Total Current Assets was $3,212 Mil.
Total Assets was $7,317 Mil.
Property, Plant and Equipment(Net PPE) was $956 Mil.
Depreciation, Depletion and Amortization(DDA) was $309 Mil.
Selling, General & Admin. Expense(SGA) was $1,948 Mil.
Total Current Liabilities was $1,646 Mil.
Long-Term Debt was $1,100 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)|
|=||(961.2 / 4934.3)||/||(824.2 / 4527.4)|
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)|
|=||(1039.5 / 4527.4)||/||(1119.2 / 4934.3)|
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 - (4288.3 + 891.8) / 8323)||/||(1 - (3212.1 + 955.8) / 7317.2)|
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))|
|=||(308.6 / (308.6 + 955.8))||/||(324.4 / (324.4 + 891.8))|
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)|
|=||(1651.3 / 4934.3)||/||(1948 / 4527.4)|
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)|
|=||((0 + 1807.9) / 8323)||/||((1100 + 1645.6) / 7317.2)|
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|
|=||(665.1 - -3.9||-||1463)||/||8323|
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.
Shire PLC has a M-score of -2.66 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
Shire PLC Annual Data
Shire PLC Quarterly Data