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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 Shire PLC was -1.38. The lowest was -4.17. And the median was -2.70.
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 * 1.2264||+||0.528 * 1.2764||+||0.404 * 0.9713||+||0.892 * 1.7761||+||0.115 * 2.3535|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9185||+||4.679 * -0.0344||-||0.327 * 1.8081|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $2,617 Mil.|
Revenue was 3806.1 + 3452.1 + 2429.1 + 1709.3 = $11,397 Mil.
Gross Profit was 2752.5 + 1715.9 + 1651 + 1460.7 = $7,580 Mil.
Total Current Assets was $7,540 Mil.
Total Assets was $67,035 Mil.
Property, Plant and Equipment(Net PPE) was $6,470 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,466 Mil.
Selling, General & Admin. Expense(SGA) was $3,150 Mil.
Total Current Liabilities was $7,743 Mil.
Long-Term Debt was $19,900 Mil.
Net Income was 457.3 + -386.8 + -162.1 + 419 = $327 Mil.
Non Operating Income was -9.4 + -13.7 + 6 + -8.5 = $-26 Mil.
Cash Flow from Operations was 1152.9 + 525.6 + 590.9 + 389.5 = $2,659 Mil.
|Accounts Receivable was $1,201 Mil.
Revenue was 1715.7 + 1655 + 1557.6 + 1488.4 = $6,417 Mil.
Gross Profit was 1465.2 + 1392.3 + 1329.6 + 1260.6 = $5,448 Mil.
Total Current Assets was $2,256 Mil.
Total Assets was $16,610 Mil.
Property, Plant and Equipment(Net PPE) was $828 Mil.
Depreciation, Depletion and Amortization(DDA) was $637 Mil.
Selling, General & Admin. Expense(SGA) was $1,931 Mil.
Total Current Liabilities was $3,706 Mil.
Long-Term Debt was $82 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)|
|=||(2616.5 / 11396.6)||/||(1201.2 / 6416.7)|
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)|
|=||(5447.7 / 6416.7)||/||(7580.1 / 11396.6)|
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 - (7539.5 + 6469.6) / 67035.4)||/||(1 - (2255.5 + 828.1) / 16609.8)|
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))|
|=||(637.2 / (637.2 + 828.1))||/||(1466.3 / (1466.3 + 6469.6))|
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)|
|=||(3149.8 / 11396.6)||/||(1930.8 / 6416.7)|
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)|
|=||((19899.8 + 7743.3) / 67035.4)||/||((82.1 + 3706.1) / 16609.8)|
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|
|=||(327.4 - -25.6||-||2658.9)||/||67035.4|
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 -1.70 signals that the company is likely to 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