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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 -1.46. The lowest was -4.99. And the median was -2.59.
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 * 1.3706||+||0.528 * 1.2581||+||0.404 * 0.9742||+||0.892 * 1.4826||+||0.115 * 1.7133|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0495||+||4.679 * -0.03||-||0.327 * 1.6219|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $2,633 Mil.|
Revenue was 3452.1 + 2429.1 + 1709.3 + 1715.7 = $9,306 Mil.
Gross Profit was 1715.9 + 1651 + 1460.7 + 1465.2 = $6,293 Mil.
Total Current Assets was $8,905 Mil.
Total Assets was $69,751 Mil.
Property, Plant and Equipment(Net PPE) was $6,528 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,132 Mil.
Selling, General & Admin. Expense(SGA) was $3,145 Mil.
Total Current Liabilities was $7,111 Mil.
Long-Term Debt was $20,989 Mil.
Net Income was -386.8 + -162.1 + 419 + 280.6 = $151 Mil.
Non Operating Income was -13.7 + 6 + -8.5 + -8.2 = $-24 Mil.
Cash Flow from Operations was 525.6 + 590.9 + 389.5 + 761.8 = $2,268 Mil.
|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 $581 Mil.
Selling, General & Admin. Expense(SGA) was $2,021 Mil.
Total Current Liabilities was $4,265 Mil.
Long-Term Debt was $71 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)|
|=||(2633.4 / 9306.2)||/||(1296 / 6277.1)|
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)|
|=||(5340.1 / 6277.1)||/||(6292.8 / 9306.2)|
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 - (8904.5 + 6527.7) / 69751.3)||/||(1 - (2706.1 + 795.9) / 17453.6)|
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))|
|=||(580.6 / (580.6 + 795.9))||/||(2131.9 / (2131.9 + 6527.7))|
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)|
|=||(3145 / 9306.2)||/||(2021.3 / 6277.1)|
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)|
|=||((20988.9 + 7110.9) / 69751.3)||/||((70.7 + 4264.5) / 17453.6)|
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|
|=||(150.7 - -24.4||-||2267.8)||/||69751.3|
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 -1.85 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