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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 -2.51 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 -2.27.
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 * 1.0715||+||0.528 * 1.0328||+||0.404 * 0.805||+||0.892 * 1.3323||+||0.115 * 0.9062|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8507||+||4.679 * -0.0753||-||0.327 * 0.9835|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $610 Mil.|
Revenue was 2352.9 + 2159.8 + 1556.8 + 1441.6 = $7,511 Mil.
Gross Profit was 379.6 + 355.1 + 297 + 265.2 = $1,297 Mil.
Total Current Assets was $810 Mil.
Total Assets was $6,055 Mil.
Property, Plant and Equipment(Net PPE) was $4,464 Mil.
Depreciation, Depletion and Amortization(DDA) was $288 Mil.
Selling, General & Admin. Expense(SGA) was $257 Mil.
Total Current Liabilities was $758 Mil.
Long-Term Debt was $2,892 Mil.
Net Income was 19.6 + 20.5 + 16.3 + 15 = $71 Mil.
Non Operating Income was 4.9 + 4.7 + 7.3 + 2 = $19 Mil.
Cash Flow from Operations was 318.7 + 124.6 + 95.4 + -30.2 = $509 Mil.
|Accounts Receivable was $428 Mil.
Revenue was 1397.8 + 1527.3 + 1393.5 + 1319.1 = $5,638 Mil.
Gross Profit was 260.3 + 260.1 + 240.5 + 244.5 = $1,005 Mil.
Total Current Assets was $631 Mil.
Total Assets was $5,149 Mil.
Property, Plant and Equipment(Net PPE) was $3,692 Mil.
Depreciation, Depletion and Amortization(DDA) was $214 Mil.
Selling, General & Admin. Expense(SGA) was $227 Mil.
Total Current Liabilities was $633 Mil.
Long-Term Debt was $2,522 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)|
|=||(610.4 / 7511.1)||/||(427.6 / 5637.7)|
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)|
|=||(355.1 / 5637.7)||/||(379.6 / 7511.1)|
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 - (809.9 + 4464.3) / 6055.2)||/||(1 - (631.2 + 3692.4) / 5148.5)|
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))|
|=||(214.2 / (214.2 + 3692.4))||/||(287.5 / (287.5 + 4464.3))|
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)|
|=||(257.4 / 7511.1)||/||(227.1 / 5637.7)|
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)|
|=||((2891.7 + 758.4) / 6055.2)||/||((2522.4 + 633.1) / 5148.5)|
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|
|=||(71.4 - 18.9||-||508.5)||/||6055.2|
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 -2.51 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