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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 8 years, the highest Beneish M-Score of Targa Resources Corp was -2.15. The lowest was -3.45. And the median was -2.47.
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 * 0.9816||+||0.528 * 0.9169||+||0.404 * 0.9244||+||0.892 * 0.898||+||0.115 * 0.7011|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1225||+||4.679 * -0.0707||-||0.327 * 0.8576|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $547 Mil.|
Revenue was 1652.3 + 1583.6 + 1442.4 + 1647.4 = $6,326 Mil.
Gross Profit was 286.6 + 299.5 + 299.3 + 329.4 = $1,215 Mil.
Total Current Assets was $977 Mil.
Total Assets was $13,056 Mil.
Property, Plant and Equipment(Net PPE) was $9,680 Mil.
Depreciation, Depletion and Amortization(DDA) was $792 Mil.
Selling, General & Admin. Expense(SGA) was $164 Mil.
Total Current Liabilities was $949 Mil.
Long-Term Debt was $4,726 Mil.
Net Income was -10.7 + -23.2 + -2.7 + 26.9 = $-10 Mil.
Non Operating Income was -0.8 + -7.8 + 19.8 + 2.8 = $14 Mil.
Cash Flow from Operations was 103.2 + 216.2 + 241.3 + 339.2 = $900 Mil.
|Accounts Receivable was $621 Mil.
Revenue was 1632.1 + 1699.4 + 1679.7 + 2032.8 = $7,044 Mil.
Gross Profit was 326.1 + 325.5 + 300 + 288.7 = $1,240 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 $162 Mil.
Total Current Liabilities was $862 Mil.
Long-Term Debt was $5,939 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)|
|=||(547.4 / 6325.7)||/||(621 / 7044)|
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)|
|=||(1240.3 / 7044)||/||(1214.8 / 6325.7)|
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 - (976.7 + 9680.2) / 13055.6)||/||(1 - (1001.1 + 9750.2) / 13418.2)|
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))|
|=||(546.2 / (546.2 + 9750.2))||/||(792.4 / (792.4 + 9680.2))|
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)|
|=||(163.6 / 6325.7)||/||(162.3 / 7044)|
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)|
|=||((4725.9 + 948.8) / 13055.6)||/||((5938.8 + 862.2) / 13418.2)|
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|
|=||(-9.7 - 14||-||899.9)||/||13055.6|
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 -3.00 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