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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 -1.82. The lowest was -2.85. And the median was -2.57.
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 * 1.0156||+||0.528 * 1.0459||+||0.404 * 1.5293||+||0.892 * 1.0765||+||0.115 * 0.831|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0965||+||4.679 * -0.0305||-||0.327 * 0.994|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $1,290 Mil.|
Revenue was 1499 + 1562 + 1448 + 1447 = $5,956 Mil.
Gross Profit was 1004 + 1066 + 961 + 946 = $3,977 Mil.
Total Current Assets was $2,816 Mil.
Total Assets was $12,541 Mil.
Property, Plant and Equipment(Net PPE) was $1,336 Mil.
Depreciation, Depletion and Amortization(DDA) was $415 Mil.
Selling, General & Admin. Expense(SGA) was $2,062 Mil.
Total Current Liabilities was $1,457 Mil.
Long-Term Debt was $5,403 Mil.
Net Income was 212 + 238 + 95 + 113 = $658 Mil.
Non Operating Income was -2 + -3 + -53 + 7 = $-51 Mil.
Cash Flow from Operations was 442 + 313 + 150 + 187 = $1,092 Mil.
|Accounts Receivable was $1,180 Mil.
Revenue was 1339 + 1410 + 1345 + 1439 = $5,533 Mil.
Gross Profit was 914 + 986 + 950 + 1014 = $3,864 Mil.
Total Current Assets was $4,991 Mil.
Total Assets was $11,125 Mil.
Property, Plant and Equipment(Net PPE) was $1,268 Mil.
Depreciation, Depletion and Amortization(DDA) was $311 Mil.
Selling, General & Admin. Expense(SGA) was $1,747 Mil.
Total Current Liabilities was $2,858 Mil.
Long-Term Debt was $3,264 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)|
|=||(1290 / 5956)||/||(1180 / 5533)|
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)|
|=||(3864 / 5533)||/||(3977 / 5956)|
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 - (2816 + 1336) / 12541)||/||(1 - (4991 + 1268) / 11125)|
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))|
|=||(311 / (311 + 1268))||/||(415 / (415 + 1336))|
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)|
|=||(2062 / 5956)||/||(1747 / 5533)|
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)|
|=||((5403 + 1457) / 12541)||/||((3264 + 2858) / 11125)|
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|
|=||(658 - -51||-||1092)||/||12541|
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 -2.34 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