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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 -1.77. The lowest was -7.37. And the median was -2.80.
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 * 1.1713||+||0.528 * 1.0018||+||0.404 * 1.097||+||0.892 * 0.8751||+||0.115 * 1.0767|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0878||+||4.679 * -0.1151||-||0.327 * 0.9728|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $11,028 Mil.|
Revenue was 16732.4290999 + 17030.9278351 + 18008.1521739 + 17142.461964 = $68,914 Mil.
Gross Profit was 11700.3699137 + 12087.628866 + 13001.3586957 + 12190.8713693 = $48,980 Mil.
Total Current Assets was $28,192 Mil.
Total Assets was $150,800 Mil.
Property, Plant and Equipment(Net PPE) was $41,113 Mil.
Depreciation, Depletion and Amortization(DDA) was $11,233 Mil.
Selling, General & Admin. Expense(SGA) was $10,808 Mil.
Total Current Liabilities was $36,620 Mil.
Long-Term Debt was $62,501 Mil.
Net Income was 187.422934649 + 1219.07216495 + 1645.38043478 + 957.123098202 = $4,009 Mil.
Non Operating Income was -917.38594328 + -11.5979381443 + -328.804347826 + 1.38312586445 = $-1,256 Mil.
Cash Flow from Operations was 15034.5252774 + 0 + 7584.23913043 + 0 = $22,619 Mil.
|Accounts Receivable was $10,760 Mil.
Revenue was 21329.218107 + 19022.6969292 + 19846.9656992 + 18554.4041451 = $78,753 Mil.
Gross Profit was 15297.6680384 + 13411.2149533 + 14236.1477573 + 13129.5336788 = $56,075 Mil.
Total Current Assets was $40,144 Mil.
Total Assets was $163,048 Mil.
Property, Plant and Equipment(Net PPE) was $42,579 Mil.
Depreciation, Depletion and Amortization(DDA) was $12,793 Mil.
Selling, General & Admin. Expense(SGA) was $11,354 Mil.
Total Current Liabilities was $39,978 Mil.
Long-Term Debt was $70,195 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)|
|=||(11028.3600493 / 68913.9710729)||/||(10759.9451303 / 78753.2848805)|
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)|
|=||(12087.628866 / 78753.2848805)||/||(11700.3699137 / 68913.9710729)|
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 - (28192.3551171 + 41113.4401973) / 150800.246609)||/||(1 - (40144.0329218 + 42578.8751715) / 163048.010974)|
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))|
|=||(12793.4119128 / (12793.4119128 + 42578.8751715))||/||(11232.6100157 / (11232.6100157 + 41113.4401973))|
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)|
|=||(10808.0441666 / 68913.9710729)||/||(11354.4285094 / 78753.2848805)|
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)|
|=||((62500.6165228 + 36620.2219482) / 150800.246609)||/||((70194.78738 + 39978.0521262) / 163048.010974)|
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|
|=||(4008.99863258 - -1256.40510339||-||22618.7644079)||/||150800.246609|
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 -2.93 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
Telefonica SA Quarterly Data