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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 -2.58.
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 * 0.9016||+||0.528 * 0.8251||+||0.404 * 1.675||+||0.892 * 0.979||+||0.115 * 1.3528|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1482||+||4.679 * -0.0524||-||0.327 * 0.8141|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $603 Mil.|
Revenue was 1699.4 + 1679.7 + 2032.8 + 2288.3 = $7,700 Mil.
Gross Profit was 462.4 + 411.4 + 398.1 + 407.8 = $1,680 Mil.
Total Current Assets was $964 Mil.
Total Assets was $13,353 Mil.
Property, Plant and Equipment(Net PPE) was $9,684 Mil.
Depreciation, Depletion and Amortization(DDA) was $468 Mil.
Selling, General & Admin. Expense(SGA) was $631 Mil.
Total Current Liabilities was $847 Mil.
Long-Term Debt was $5,796 Mil.
Net Income was 15.2 + 3.2 + 25.5 + 30.7 = $75 Mil.
Non Operating Income was -3.6 + -32.5 + -15.6 + 4.1 = $-48 Mil.
Cash Flow from Operations was 191.6 + 292.6 + 242.7 + 94.6 = $822 Mil.
|Accounts Receivable was $683 Mil.
Revenue was 2000.6 + 2294.7 + 2104.4 + 1466 = $7,866 Mil.
Gross Profit was 384 + 379.6 + 355.1 + 297 = $1,416 Mil.
Total Current Assets was $939 Mil.
Total Assets was $6,328 Mil.
Property, Plant and Equipment(Net PPE) was $4,624 Mil.
Depreciation, Depletion and Amortization(DDA) was $308 Mil.
Selling, General & Admin. Expense(SGA) was $561 Mil.
Total Current Liabilities was $819 Mil.
Long-Term Debt was $3,048 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)|
|=||(602.5 / 7700.2)||/||(682.6 / 7865.7)|
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)|
|=||(411.4 / 7865.7)||/||(462.4 / 7700.2)|
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 - (963.5 + 9684.3) / 13352.9)||/||(1 - (939.2 + 4623.8) / 6328.4)|
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))|
|=||(307.6 / (307.6 + 4623.8))||/||(468.1 / (468.1 + 9684.3))|
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)|
|=||(630.9 / 7700.2)||/||(561.3 / 7865.7)|
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)|
|=||((5796.1 + 847) / 13352.9)||/||((3048.2 + 818.9) / 6328.4)|
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|
|=||(74.6 - -47.6||-||821.5)||/||13352.9|
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 -2.58 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