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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 Telefonica SA was -0.68. The lowest was -15.04. And the median was -2.30.
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 Telefonica SA 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 * 0.6259||+||0.528 * 1.078||+||0.404 * 0.9132||+||0.892 * 1.1572||+||0.115 * 0.7595|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0298||+||4.679 * -0.1034||-||0.327 * 1.0146|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $7,988 Mil.|
Revenue was $62,012 Mil.
Gross Profit was $43,987 Mil.
Total Current Assets was $34,397 Mil.
Total Assets was $133,959 Mil.
Property, Plant and Equipment(Net PPE) was $33,278 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,571 Mil.
Selling, General & Admin. Expense(SGA) was $11,273 Mil.
Total Current Liabilities was $37,984 Mil.
Long-Term Debt was $51,326 Mil.
Net Income was $671 Mil.
Non Operating Income was $-303 Mil.
Cash Flow from Operations was $14,831 Mil.
|Accounts Receivable was $11,028 Mil.
Revenue was $53,586 Mil.
Gross Profit was $40,973 Mil.
Total Current Assets was $28,237 Mil.
Total Assets was $150,861 Mil.
Property, Plant and Equipment(Net PPE) was $40,883 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,163 Mil.
Selling, General & Admin. Expense(SGA) was $9,460 Mil.
Total Current Liabilities was $36,633 Mil.
Long-Term Debt was $62,501 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)|
|=||(7988.01742919 / 62011.9825708)||/||(11028.3600493 / 53585.6966708)|
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)|
|=||(40972.8729963 / 53585.6966708)||/||(43986.9281046 / 62011.9825708)|
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 - (34396.5141612 + 33277.7777778) / 133958.605664)||/||(1 - (28236.7447596 + 40882.8606658) / 150860.665845)|
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))|
|=||(9162.76202219 / (9162.76202219 + 40882.8606658))||/||(10570.8061002 / (10570.8061002 + 33277.7777778))|
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)|
|=||(11273.4204793 / 62011.9825708)||/||(9459.92601726 / 53585.6966708)|
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)|
|=||((51325.708061 + 37983.6601307) / 133958.605664)||/||((62500.6165228 + 36632.5524044) / 150860.665845)|
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|
|=||(671.023965142 - -302.832244009||-||14831.1546841)||/||133958.605664|
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.
Telefonica SA has a M-score of -3.20 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
Telefonica SA Annual Data