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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 -2.63.
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 * 0.8987||+||0.528 * 0.9896||+||0.404 * 1.1555||+||0.892 * 1.1632||+||0.115 * 0.8147|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1418||+||4.679 * -0.1514||-||0.327 * 0.9534|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|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.
Net Income was 159.6 + 410.4 + 2172.3 + 479.7 = $3,222 Mil.
Non Operating Income was -2 + 4.3 + 1629.5 + 6.8 = $1,639 Mil.
Cash Flow from Operations was 452.3 + 561.6 + 2554.9 + 593.4 = $4,162 Mil.
|Accounts Receivable was $1,052 Mil.
Revenue was 1502.1 + 1346.8 + 1261.3 + 1236.6 = $5,347 Mil.
Gross Profit was 1225.1 + 1117.3 + 1119.2 + 1039.5 = $4,501 Mil.
Total Current Assets was $2,613 Mil.
Total Assets was $11,344 Mil.
Property, Plant and Equipment(Net PPE) was $853 Mil.
Depreciation, Depletion and Amortization(DDA) was $378 Mil.
Selling, General & Admin. Expense(SGA) was $1,682 Mil.
Total Current Liabilities was $2,217 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)|
|=||(1099.2 / 6219.2)||/||(1051.5 / 5346.8)|
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)|
|=||(1260.6 / 5346.8)||/||(1329.6 / 6219.2)|
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 - (2547 + 816.7) / 17030.5)||/||(1 - (2613 + 852.5) / 11344.4)|
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))|
|=||(378 / (378 + 852.5))||/||(494.3 / (494.3 + 816.7))|
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)|
|=||(2233.2 / 6219.2)||/||(1681.5 / 5346.8)|
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)|
|=||((73.9 + 4315.1) / 17030.5)||/||((850 + 2216.6) / 11344.4)|
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|
|=||(3222 - 1638.6||-||4162.2)||/||17030.5|
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 -3.11 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