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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 -2.55.
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 * 1.033||+||0.528 * 1.0305||+||0.404 * 1.3365||+||0.892 * 0.9856||+||0.115 * 0.9287|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0266||+||4.679 * -0.012||-||0.327 * 1.2202|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $1,237 Mil.|
Revenue was 1447 + 1339 + 1410 + 1345 = $5,541 Mil.
Gross Profit was 946 + 914 + 986 + 950 = $3,796 Mil.
Total Current Assets was $3,265 Mil.
Total Assets was $13,064 Mil.
Property, Plant and Equipment(Net PPE) was $1,320 Mil.
Depreciation, Depletion and Amortization(DDA) was $334 Mil.
Selling, General & Admin. Expense(SGA) was $1,878 Mil.
Total Current Liabilities was $2,473 Mil.
Long-Term Debt was $5,229 Mil.
Net Income was 113 + 215 + 290 + 262 = $880 Mil.
Non Operating Income was 7 + -12 + 0 + 3 = $-2 Mil.
Cash Flow from Operations was 187 + 411 + 207 + 234 = $1,039 Mil.
|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 $3,900 Mil.
Total Assets was $10,193 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 $2,259 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)|
|=||(1237 / 5541)||/||(1215 / 5622)|
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)|
|=||(914 / 5622)||/||(946 / 5541)|
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 - (3265 + 1320) / 13064)||/||(1 - (3900 + 1343) / 10193)|
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))|
|=||(310 / (310 + 1343))||/||(334 / (334 + 1320))|
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)|
|=||(1878 / 5541)||/||(1856 / 5622)|
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)|
|=||((5229 + 2473) / 13064)||/||((2259 + 2666) / 10193)|
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|
|=||(880 - -2||-||1039)||/||13064|
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 -2.45 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