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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 -2.21. The lowest was -5.00. And the median was -2.64.
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 * 1.1042||+||0.528 * 0.9842||+||0.404 * 1.1786||+||0.892 * 1.0875||+||0.115 * 0.7823|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1044||+||4.679 * -0.1476||-||0.327 * 1.0049|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,296 Mil.|
Revenue was 1655 + 1557.6 + 1488.4 + 1576.1 = $6,277 Mil.
Gross Profit was 1392.3 + 1329.6 + 1260.6 + 1357.6 = $5,340 Mil.
Total Current Assets was $2,706 Mil.
Total Assets was $17,454 Mil.
Property, Plant and Equipment(Net PPE) was $796 Mil.
Depreciation, Depletion and Amortization(DDA) was $558 Mil.
Selling, General & Admin. Expense(SGA) was $2,285 Mil.
Total Current Liabilities was $4,265 Mil.
Long-Term Debt was $71 Mil.
Net Income was 452.8 + 159.6 + 410.4 + 2172.3 = $3,195 Mil.
Non Operating Income was 9.6 + -2 + 4.3 + 1629.5 = $1,641 Mil.
Cash Flow from Operations was 561.3 + 452.3 + 561.6 + 2554.9 = $4,130 Mil.
|Accounts Receivable was $1,079 Mil.
Revenue was 1597.1 + 1502.1 + 1346.8 + 1326 = $5,772 Mil.
Gross Profit was 1342.8 + 1225.1 + 1117.3 + 1147.4 = $4,833 Mil.
Total Current Assets was $2,868 Mil.
Total Assets was $11,541 Mil.
Property, Plant and Equipment(Net PPE) was $846 Mil.
Depreciation, Depletion and Amortization(DDA) was $402 Mil.
Selling, General & Admin. Expense(SGA) was $1,903 Mil.
Total Current Liabilities was $2,002 Mil.
Long-Term Debt was $850 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)|
|=||(1296 / 6277.1)||/||(1079.3 / 5772)|
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)|
|=||(1329.6 / 5772)||/||(1392.3 / 6277.1)|
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 - (2706.1 + 795.9) / 17453.6)||/||(1 - (2868.1 + 845.6) / 11540.5)|
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))|
|=||(402.1 / (402.1 + 845.6))||/||(557.6 / (557.6 + 795.9))|
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)|
|=||(2285.3 / 6277.1)||/||(1902.7 / 5772)|
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)|
|=||((70.7 + 4264.5) / 17453.6)||/||((850 + 2002.4) / 11540.5)|
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|
|=||(3195.1 - 1641.4||-||4130.1)||/||17453.6|
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 -2.98 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