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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 -3.49. And the median was -2.62.
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 * 1.0972||+||0.528 * 0.5964||+||0.404 * 1.7317||+||0.892 * 0.8108||+||0.115 * 1.2253|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 2.2188||+||4.679 * -0.0618||-||0.327 * 0.8352|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $621 Mil.|
Revenue was 1632.1 + 1699.4 + 1679.7 + 2032.8 = $7,044 Mil.
Gross Profit was 326.1 + 462.4 + 411.4 + 721.8 = $1,922 Mil.
Total Current Assets was $1,001 Mil.
Total Assets was $13,418 Mil.
Property, Plant and Equipment(Net PPE) was $9,750 Mil.
Depreciation, Depletion and Amortization(DDA) was $546 Mil.
Selling, General & Admin. Expense(SGA) was $844 Mil.
Total Current Liabilities was $862 Mil.
Long-Term Debt was $5,939 Mil.
Net Income was 12.7 + 15.2 + 3.2 + 25.5 = $57 Mil.
Non Operating Income was -0.1 + -3.6 + -32.5 + -15.6 = $-52 Mil.
Cash Flow from Operations was 211.3 + 191.6 + 292.6 + 242.7 = $938 Mil.
|Accounts Receivable was $698 Mil.
Revenue was 2288.3 + 2000.6 + 2294.7 + 2104.4 = $8,688 Mil.
Gross Profit was 295 + 384 + 379.6 + 355.1 = $1,414 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 $469 Mil.
Total Current Liabilities was $803 Mil.
Long-Term Debt was $3,137 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)|
|=||(621 / 7044)||/||(698.1 / 8688)|
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)|
|=||(462.4 / 8688)||/||(326.1 / 7044)|
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 - (1001.1 + 9750.2) / 13418.2)||/||(1 - (1053.1 + 4693.7) / 6491.9)|
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))|
|=||(326.3 / (326.3 + 4693.7))||/||(546.2 / (546.2 + 9750.2))|
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)|
|=||(843.7 / 7044)||/||(469 / 8688)|
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)|
|=||((5938.8 + 862.2) / 13418.2)||/||((3137.2 + 802.7) / 6491.9)|
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|
|=||(56.6 - -51.8||-||938.2)||/||13418.2|
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 -2.90 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