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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 8 years, the highest Beneish M-Score of Targa Resources Corp was -2.07. The lowest was -3.49. And the median was -2.55.
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 Targa Resources Corp 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 * 0.7901||+||0.528 * 0.7179||+||0.404 * 0.9649||+||0.892 * 0.8025||+||0.115 * 0.532|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4483||+||4.679 * -0.0746||-||0.327 * 0.866|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $428 Mil.|
Revenue was 1442.4 + 1647.4 + 1632.1 + 1699.4 = $6,421 Mil.
Gross Profit was 299.3 + 329.4 + 326.1 + 462.4 = $1,417 Mil.
Total Current Assets was $716 Mil.
Total Assets was $12,949 Mil.
Property, Plant and Equipment(Net PPE) was $9,735 Mil.
Depreciation, Depletion and Amortization(DDA) was $752 Mil.
Selling, General & Admin. Expense(SGA) was $302 Mil.
Total Current Liabilities was $693 Mil.
Long-Term Debt was $4,921 Mil.
Net Income was -2.7 + 26.9 + 12.7 + 15.2 = $52 Mil.
Non Operating Income was 19.8 + -3.3 + -0.1 + -3.6 = $13 Mil.
Cash Flow from Operations was 241.3 + 339.2 + 211.3 + 212.9 = $1,005 Mil.
|Accounts Receivable was $676 Mil.
Revenue was 1679.7 + 2032.8 + 2288.3 + 2000.6 = $8,001 Mil.
Gross Profit was 300 + 288.7 + 295 + 384 = $1,268 Mil.
Total Current Assets was $1,068 Mil.
Total Assets was $13,625 Mil.
Property, Plant and Equipment(Net PPE) was $9,833 Mil.
Depreciation, Depletion and Amortization(DDA) was $390 Mil.
Selling, General & Admin. Expense(SGA) was $259 Mil.
Total Current Liabilities was $983 Mil.
Long-Term Debt was $5,838 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)|
|=||(428.4 / 6421.3)||/||(675.6 / 8001.4)|
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)|
|=||(1267.7 / 8001.4)||/||(1417.2 / 6421.3)|
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 - (715.9 + 9734.6) / 12949.2)||/||(1 - (1067.6 + 9833) / 13625.3)|
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))|
|=||(390 / (390 + 9833))||/||(752 / (752 + 9734.6))|
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)|
|=||(301.5 / 6421.3)||/||(259.4 / 8001.4)|
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)|
|=||((4921.2 + 693) / 12949.2)||/||((5838.2 + 982.9) / 13625.3)|
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|
|=||(52.1 - 12.8||-||1004.7)||/||12949.2|
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.
Targa Resources Corp has a M-score of -3.45 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
Targa Resources Corp Annual Data
Targa Resources Corp Quarterly Data