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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 Teva Pharmaceutical Industries Ltd was -1.60. The lowest was -3.11. And the median was -2.50.
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 Teva Pharmaceutical Industries Ltd 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 * 1.0517||+||0.528 * 0.9348||+||0.404 * 1.0738||+||0.892 * 0.9824||+||0.115 * 1.1022|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9707||+||4.679 * -0.0732||-||0.327 * 1.0602|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $5,568 Mil.|
Revenue was 4966 + 4982 + 5168 + 5058 = $20,174 Mil.
Gross Profit was 2902 + 2836 + 2889 + 2809 = $11,436 Mil.
Total Current Assets was $13,299 Mil.
Total Assets was $50,371 Mil.
Property, Plant and Equipment(Net PPE) was $6,427 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,388 Mil.
Selling, General & Admin. Expense(SGA) was $4,983 Mil.
Total Current Liabilities was $14,473 Mil.
Long-Term Debt was $9,496 Mil.
Net Income was 539 + 446 + 687 + 876 = $2,548 Mil.
Non Operating Income was -82 + 0 + 473 + -168 = $223 Mil.
Cash Flow from Operations was 1480 + 1354 + 1752 + 1424 = $6,010 Mil.
|Accounts Receivable was $5,389 Mil.
Revenue was 5045 + 5001 + 5430 + 5059 = $20,535 Mil.
Gross Profit was 2661 + 2697 + 2894 + 2630 = $10,882 Mil.
Total Current Assets was $13,546 Mil.
Total Assets was $46,734 Mil.
Property, Plant and Equipment(Net PPE) was $6,709 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,633 Mil.
Selling, General & Admin. Expense(SGA) was $5,225 Mil.
Total Current Liabilities was $11,854 Mil.
Long-Term Debt was $9,122 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)|
|=||(5568 / 20174)||/||(5389 / 20535)|
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)|
|=||(2836 / 20535)||/||(2902 / 20174)|
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 - (13299 + 6427) / 50371)||/||(1 - (13546 + 6709) / 46734)|
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))|
|=||(1633 / (1633 + 6709))||/||(1388 / (1388 + 6427))|
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)|
|=||(4983 / 20174)||/||(5225 / 20535)|
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)|
|=||((9496 + 14473) / 50371)||/||((9122 + 11854) / 46734)|
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|
|=||(2548 - 223||-||6010)||/||50371|
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.
Teva Pharmaceutical Industries Ltd has a M-score of -2.80 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
Teva Pharmaceutical Industries Ltd Annual Data
Teva Pharmaceutical Industries Ltd Quarterly Data