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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 -2.08. The lowest was -2.87. And the median was -2.49.
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 * 1.0218||+||0.528 * 0.9772||+||0.404 * 0.9777||+||0.892 * 1.0199||+||0.115 * 1.0185|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9721||+||4.679 * -0.0239||-||0.327 * 0.9465|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $5,410 Mil.|
Revenue was 5058 + 5045 + 5001 + 5430 = $20,534 Mil.
Gross Profit was 2809 + 2661 + 2697 + 2894 = $11,061 Mil.
Total Current Assets was $13,922 Mil.
Total Assets was $46,608 Mil.
Property, Plant and Equipment(Net PPE) was $6,551 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,575 Mil.
Selling, General & Admin. Expense(SGA) was $5,200 Mil.
Total Current Liabilities was $11,669 Mil.
Long-Term Debt was $8,818 Mil.
Net Income was 876 + 748 + 744 + 380 = $2,748 Mil.
Non Operating Income was -168 + 0 + -162 + 0 = $-330 Mil.
Cash Flow from Operations was 1424 + 1053 + 898 + 816 = $4,191 Mil.
|Accounts Receivable was $5,191 Mil.
Revenue was 5059 + 4924 + 4901 + 5249 = $20,133 Mil.
Gross Profit was 2630 + 2593 + 2590 + 2785 = $10,598 Mil.
Total Current Assets was $13,906 Mil.
Total Assets was $47,850 Mil.
Property, Plant and Equipment(Net PPE) was $6,501 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,599 Mil.
Selling, General & Admin. Expense(SGA) was $5,245 Mil.
Total Current Liabilities was $12,160 Mil.
Long-Term Debt was $10,061 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)|
|=||(5410 / 20534)||/||(5191 / 20133)|
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)|
|=||(2661 / 20133)||/||(2809 / 20534)|
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 - (13922 + 6551) / 46608)||/||(1 - (13906 + 6501) / 47850)|
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))|
|=||(1599 / (1599 + 6501))||/||(1575 / (1575 + 6551))|
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)|
|=||(5200 / 20534)||/||(5245 / 20133)|
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)|
|=||((8818 + 11669) / 46608)||/||((10061 + 12160) / 47850)|
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|
|=||(2748 - -330||-||4191)||/||46608|
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 -2.55 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