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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 St Jude Medical Inc was -1.93. The lowest was -2.85. And the median was -2.53.
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 St Jude Medical Inc 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 * 0.836||+||0.528 * 1.0112||+||0.404 * 1.0085||+||0.892 * 1.022||+||0.115 * 0.9278|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0061||+||4.679 * -0.0293||-||0.327 * 1.0124|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,215 Mil.|
Revenue was 1439 + 1372 + 1448 + 1363 = $5,622 Mil.
Gross Profit was 1014 + 960 + 1015 + 980 = $3,969 Mil.
Total Current Assets was $3,914 Mil.
Total Assets was $10,207 Mil.
Property, Plant and Equipment(Net PPE) was $1,343 Mil.
Depreciation, Depletion and Amortization(DDA) was $310 Mil.
Selling, General & Admin. Expense(SGA) was $1,856 Mil.
Total Current Liabilities was $2,666 Mil.
Long-Term Debt was $2,273 Mil.
Net Income was 245 + 238 + 270 + 249 = $1,002 Mil.
Non Operating Income was -2 + 0 + -1 + 0 = $-3 Mil.
Cash Flow from Operations was 400 + 340 + 291 + 273 = $1,304 Mil.
|Accounts Receivable was $1,422 Mil.
Revenue was 1422 + 1338 + 1403 + 1338 = $5,501 Mil.
Gross Profit was 992 + 953 + 1021 + 961 = $3,927 Mil.
Total Current Assets was $3,910 Mil.
Total Assets was $10,248 Mil.
Property, Plant and Equipment(Net PPE) was $1,410 Mil.
Depreciation, Depletion and Amortization(DDA) was $297 Mil.
Selling, General & Admin. Expense(SGA) was $1,805 Mil.
Total Current Liabilities was $1,380 Mil.
Long-Term Debt was $3,518 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)|
|=||(1215 / 5622)||/||(1422 / 5501)|
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)|
|=||(960 / 5501)||/||(1014 / 5622)|
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 - (3914 + 1343) / 10207)||/||(1 - (3910 + 1410) / 10248)|
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))|
|=||(297 / (297 + 1410))||/||(310 / (310 + 1343))|
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)|
|=||(1856 / 5622)||/||(1805 / 5501)|
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)|
|=||((2273 + 2666) / 10207)||/||((3518 + 1380) / 10248)|
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|
|=||(1002 - -3||-||1304)||/||10207|
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.
St Jude Medical Inc has a M-score of -2.75 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
St Jude Medical Inc Annual Data
St Jude Medical Inc Quarterly Data