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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 7 years, the highest Beneish M-Score of Targa Resources Corp was -1.70. The lowest was -3.05. And the median was -2.97.
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 * 0.6462||+||0.528 * 0.9998||+||0.404 * 0.8727||+||0.892 * 1.3325||+||0.115 * 0.8675|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 2.8814||+||4.679 * -0.1018||-||0.327 * 0.9255|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $567 Mil.|
Revenue was 2032.8 + 2288.3 + 2061.9 + 2352.9 = $8,736 Mil.
Gross Profit was 398.1 + 407.8 + 384 + 379.6 = $1,570 Mil.
Total Current Assets was $883 Mil.
Total Assets was $6,454 Mil.
Property, Plant and Equipment(Net PPE) was $4,825 Mil.
Depreciation, Depletion and Amortization(DDA) was $351 Mil.
Selling, General & Admin. Expense(SGA) was $581 Mil.
Total Current Liabilities was $827 Mil.
Long-Term Debt was $2,885 Mil.
Net Income was 25.5 + 30.7 + 26.4 + 19.6 = $102 Mil.
Non Operating Income was -15.6 + 4.1 + 4.1 + 4.9 = $-3 Mil.
Cash Flow from Operations was 242.7 + 94.6 + 105.8 + 318.7 = $762 Mil.
|Accounts Receivable was $659 Mil.
Revenue was 2159.8 + 1556.8 + 1441.6 + 1397.8 = $6,556 Mil.
Gross Profit was 355.1 + 297 + 265.2 + 260.3 = $1,178 Mil.
Total Current Assets was $897 Mil.
Total Assets was $6,049 Mil.
Property, Plant and Equipment(Net PPE) was $4,350 Mil.
Depreciation, Depletion and Amortization(DDA) was $272 Mil.
Selling, General & Admin. Expense(SGA) was $151 Mil.
Total Current Liabilities was $770 Mil.
Long-Term Debt was $2,989 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)|
|=||(567.3 / 8735.9)||/||(658.8 / 6556)|
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)|
|=||(407.8 / 6556)||/||(398.1 / 8735.9)|
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 - (882.6 + 4824.6) / 6453.5)||/||(1 - (897.2 + 4349.9) / 6048.6)|
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))|
|=||(271.9 / (271.9 + 4349.9))||/||(351 / (351 + 4824.6))|
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)|
|=||(581.3 / 8735.9)||/||(151.4 / 6556)|
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)|
|=||((2885.4 + 827.1) / 6453.5)||/||((2989.3 + 770.4) / 6048.6)|
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|
|=||(102.2 - -2.5||-||761.8)||/||6453.5|
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 -3.35 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