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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 -2.61.
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 * 0.8389||+||0.528 * 1.0407||+||0.404 * 1.5338||+||0.892 * 1.2398||+||0.115 * 0.7479|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9041||+||4.679 * -0.0866||-||0.327 * 0.7288|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|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.
Net Income was 479.7 + 523.1 + 230.4 + 64 = $1,297 Mil.
Non Operating Income was 6.8 + 3.3 + 4.7 + -2.3 = $13 Mil.
Cash Flow from Operations was 593.4 + 834 + 246.1 + 610.3 = $2,284 Mil.
|Accounts Receivable was $1,038 Mil.
Revenue was 1212.7 + 1252.2 + 1143.4 + 1047.4 = $4,656 Mil.
Gross Profit was 1032.2 + 1087.9 + 996 + 940.4 = $4,057 Mil.
Total Current Assets was $3,714 Mil.
Total Assets was $8,388 Mil.
Property, Plant and Equipment(Net PPE) was $965 Mil.
Depreciation, Depletion and Amortization(DDA) was $307 Mil.
Selling, General & Admin. Expense(SGA) was $1,698 Mil.
Total Current Liabilities was $2,845 Mil.
Long-Term Debt was $0 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)|
|=||(1079.3 / 5772)||/||(1037.8 / 4655.7)|
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)|
|=||(1225.1 / 4655.7)||/||(1342.8 / 5772)|
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 - (2868.1 + 845.6) / 11540.5)||/||(1 - (3713.9 + 965.1) / 8387.9)|
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))|
|=||(306.5 / (306.5 + 965.1))||/||(402.1 / (402.1 + 845.6))|
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)|
|=||(1902.7 / 5772)||/||(1697.6 / 4655.7)|
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)|
|=||((850 + 2002.4) / 11540.5)||/||((0 + 2844.8) / 8387.9)|
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|
|=||(1297.2 - 12.5||-||2283.8)||/||11540.5|
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 -2.51 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