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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 -2.52.
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 * 1.5034||+||0.528 * 1.0251||+||0.404 * 1.2099||+||0.892 * 1.0177||+||0.115 * 1.1213|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1425||+||4.679 * -0.0163||-||0.327 * 1.1485|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $8,071 Mil.|
Revenue was 5563 + 5038 + 4810 + 4881 = $20,292 Mil.
Gross Profit was 2801 + 2877 + 2791 + 2847 = $11,316 Mil.
Total Current Assets was $17,386 Mil.
Total Assets was $98,747 Mil.
Property, Plant and Equipment(Net PPE) was $8,379 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,527 Mil.
Selling, General & Admin. Expense(SGA) was $5,494 Mil.
Total Current Liabilities was $19,286 Mil.
Long-Term Debt was $33,179 Mil.
Net Income was 412 + 254 + 636 + 500 = $1,802 Mil.
Non Operating Income was 0 + 0 + 0 + -2000 = $-2,000 Mil.
Cash Flow from Operations was 1461 + 963 + 1376 + 1615 = $5,415 Mil.
|Accounts Receivable was $5,275 Mil.
Revenue was 4823 + 4966 + 4982 + 5168 = $19,939 Mil.
Gross Profit was 2771 + 2902 + 2836 + 2889 = $11,398 Mil.
Total Current Assets was $12,500 Mil.
Total Assets was $48,625 Mil.
Property, Plant and Equipment(Net PPE) was $6,422 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,342 Mil.
Selling, General & Admin. Expense(SGA) was $4,725 Mil.
Total Current Liabilities was $12,978 Mil.
Long-Term Debt was $9,516 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)|
|=||(8071 / 20292)||/||(5275 / 19939)|
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)|
|=||(11398 / 19939)||/||(11316 / 20292)|
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 - (17386 + 8379) / 98747)||/||(1 - (12500 + 6422) / 48625)|
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))|
|=||(1342 / (1342 + 6422))||/||(1527 / (1527 + 8379))|
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)|
|=||(5494 / 20292)||/||(4725 / 19939)|
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)|
|=||((33179 + 19286) / 98747)||/||((9516 + 12978) / 48625)|
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|
|=||(1802 - -2000||-||5415)||/||98747|
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 -2.04 signals that the company is likely to 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