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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 -1.61. The lowest was -3.11. And the median was -2.51.
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 * 0.9793||+||0.528 * 0.952||+||0.404 * 1.0778||+||0.892 * 0.9618||+||0.115 * 0.3102|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1142||+||4.679 * -0.065||-||0.327 * 0.8387|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $5,188 Mil.|
Revenue was 4810 + 4881 + 4823 + 4966 = $19,480 Mil.
Gross Profit was 2791 + 2847 + 2771 + 2902 = $11,311 Mil.
Total Current Assets was $16,994 Mil.
Total Assets was $55,126 Mil.
Property, Plant and Equipment(Net PPE) was $6,632 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,278 Mil.
Selling, General & Admin. Expense(SGA) was $5,262 Mil.
Total Current Liabilities was $12,905 Mil.
Long-Term Debt was $8,619 Mil.
Net Income was 636 + 500 + 103 + 539 = $1,778 Mil.
Non Operating Income was 0 + 2281 + -2404 + -82 = $-205 Mil.
Cash Flow from Operations was 1376 + 1615 + 1093 + 1480 = $5,564 Mil.
|Accounts Receivable was $5,508 Mil.
Revenue was 4982 + 5168 + 5058 + 5045 = $20,253 Mil.
Gross Profit was 2836 + 2889 + 2809 + 2661 = $11,195 Mil.
Total Current Assets was $15,711 Mil.
Total Assets was $46,951 Mil.
Property, Plant and Equipment(Net PPE) was $6,349 Mil.
Depreciation, Depletion and Amortization(DDA) was $335 Mil.
Selling, General & Admin. Expense(SGA) was $4,910 Mil.
Total Current Liabilities was $12,467 Mil.
Long-Term Debt was $9,391 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)|
|=||(5188 / 19480)||/||(5508 / 20253)|
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)|
|=||(11195 / 20253)||/||(11311 / 19480)|
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 - (16994 + 6632) / 55126)||/||(1 - (15711 + 6349) / 46951)|
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))|
|=||(335 / (335 + 6349))||/||(1278 / (1278 + 6632))|
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)|
|=||(5262 / 19480)||/||(4910 / 20253)|
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)|
|=||((8619 + 12905) / 55126)||/||((9391 + 12467) / 46951)|
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|
|=||(1778 - -205||-||5564)||/||55126|
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 -2.88 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