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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.
Targa Resources Corp has a M-score of -2.38 suggests that the company is not a manipulator.
During the past 6 years, the highest Beneish M-Score of Targa Resources Corp was -1.70. The lowest was -3.49. And the median was -2.54.
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 * 0.9027||+||0.528 * 1.1003||+||0.404 * 0.8144||+||0.892 * 1.5514||+||0.115 * 0.8889|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.3113||+||4.679 * -0.084||-||0.327 * 0.9774|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $698 Mil.|
Revenue was 2288.3 + 2061.9 + 2352.9 + 2345.7 = $9,049 Mil.
Gross Profit was 407.8 + 384 + 379.6 + 355.1 = $1,527 Mil.
Total Current Assets was $1,053 Mil.
Total Assets was $6,492 Mil.
Property, Plant and Equipment(Net PPE) was $4,694 Mil.
Depreciation, Depletion and Amortization(DDA) was $326 Mil.
Selling, General & Admin. Expense(SGA) was $206 Mil.
Total Current Liabilities was $803 Mil.
Long-Term Debt was $3,137 Mil.
Net Income was 30.7 + 26.4 + 19.6 + 20.5 = $97 Mil.
Non Operating Income was 4.1 + 4.1 + 4.9 + 4.7 = $18 Mil.
Cash Flow from Operations was 94.6 + 105.8 + 318.7 + 105.7 = $625 Mil.
|Accounts Receivable was $499 Mil.
Revenue was 1466 + 1441.6 + 1397.8 + 1527.3 = $5,833 Mil.
Gross Profit was 297 + 265.2 + 260.3 + 260.1 = $1,083 Mil.
Total Current Assets was $809 Mil.
Total Assets was $5,725 Mil.
Property, Plant and Equipment(Net PPE) was $4,109 Mil.
Depreciation, Depletion and Amortization(DDA) was $252 Mil.
Selling, General & Admin. Expense(SGA) was $426 Mil.
Total Current Liabilities was $687 Mil.
Long-Term Debt was $2,868 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)|
|=||(698.1 / 9048.8)||/||(498.5 / 5832.7)|
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)|
|=||(384 / 5832.7)||/||(407.8 / 9048.8)|
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 - (1053.1 + 4693.7) / 6491.9)||/||(1 - (809 + 4109.4) / 5725.3)|
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))|
|=||(252 / (252 + 4109.4))||/||(326.3 / (326.3 + 4693.7))|
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)|
|=||(205.5 / 9048.8)||/||(425.5 / 5832.7)|
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)|
|=||((3137.2 + 802.7) / 6491.9)||/||((2867.9 + 687.1) / 5725.3)|
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|
|=||(97.2 - 17.8||-||624.8)||/||6491.9|
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 -2.38 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