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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 -1.45. The lowest was -4.99. And the median was -2.61.
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 * 1.8177||+||0.528 * 1.0701||+||0.404 * 0.9597||+||0.892 * 1.2074||+||0.115 * 2.7042|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9242||+||4.679 * -0.0186||-||0.327 * 1.5455|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2,412 Mil.|
Revenue was 2429.1 + 1709.3 + 1715.7 + 1655 = $7,509 Mil.
Gross Profit was 1651 + 1460.7 + 1465.2 + 1392.3 = $5,969 Mil.
Total Current Assets was $9,658 Mil.
Total Assets was $70,721 Mil.
Property, Plant and Equipment(Net PPE) was $6,596 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,069 Mil.
Selling, General & Admin. Expense(SGA) was $2,492 Mil.
Total Current Liabilities was $6,855 Mil.
Long-Term Debt was $21,312 Mil.
Net Income was -162.1 + 419 + 280.6 + 452.8 = $990 Mil.
Non Operating Income was 6 + -8.5 + -8.2 + 9.6 = $-1 Mil.
Cash Flow from Operations was 590.9 + 389.5 + 761.8 + 561.3 = $2,304 Mil.
|Accounts Receivable was $1,099 Mil.
Revenue was 1557.6 + 1488.4 + 1576.1 + 1597.1 = $6,219 Mil.
Gross Profit was 1329.6 + 1260.6 + 1357.6 + 1342.8 = $5,291 Mil.
Total Current Assets was $2,547 Mil.
Total Assets was $17,031 Mil.
Property, Plant and Equipment(Net PPE) was $817 Mil.
Depreciation, Depletion and Amortization(DDA) was $494 Mil.
Selling, General & Admin. Expense(SGA) was $2,233 Mil.
Total Current Liabilities was $4,315 Mil.
Long-Term Debt was $74 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)|
|=||(2412.4 / 7509.1)||/||(1099.2 / 6219.2)|
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)|
|=||(5290.6 / 6219.2)||/||(5969.2 / 7509.1)|
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 - (9658.1 + 6596.3) / 70720.5)||/||(1 - (2547 + 816.7) / 17030.5)|
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))|
|=||(494.3 / (494.3 + 816.7))||/||(1068.7 / (1068.7 + 6596.3))|
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)|
|=||(2492.1 / 7509.1)||/||(2233.2 / 6219.2)|
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)|
|=||((21312.1 + 6854.8) / 70720.5)||/||((73.9 + 4315.1) / 17030.5)|
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|
|=||(990.3 - -1.1||-||2303.5)||/||70720.5|
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 -1.58 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