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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 -2.55.
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 * 1.003||+||0.528 * 0.8937||+||0.404 * 1.5504||+||0.892 * 1.1035||+||0.115 * 1.5821|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9814||+||4.679 * -0.0448||-||0.327 * 0.8305|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $676 Mil.|
Revenue was 1679.7 + 2032.8 + 2288.3 + 2061.9 = $8,063 Mil.
Gross Profit was 411.4 + 398.1 + 407.8 + 384 = $1,601 Mil.
Total Current Assets was $1,068 Mil.
Total Assets was $13,625 Mil.
Property, Plant and Equipment(Net PPE) was $9,833 Mil.
Depreciation, Depletion and Amortization(DDA) was $391 Mil.
Selling, General & Admin. Expense(SGA) was $593 Mil.
Total Current Liabilities was $983 Mil.
Long-Term Debt was $5,838 Mil.
Net Income was 3.2 + 25.5 + 30.7 + 26.4 = $86 Mil.
Non Operating Income was -32.5 + -15.6 + 4.1 + 4.1 = $-40 Mil.
Cash Flow from Operations was 292.6 + 242.7 + 94.6 + 105.8 = $736 Mil.
|Accounts Receivable was $610 Mil.
Revenue was 2294.7 + 2104.4 + 1466 + 1441.6 = $7,307 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 $548 Mil.
Total Current Liabilities was $758 Mil.
Long-Term Debt was $2,892 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)|
|=||(675.6 / 8062.7)||/||(610.4 / 7306.7)|
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)|
|=||(398.1 / 7306.7)||/||(411.4 / 8062.7)|
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 - (1067.6 + 9833) / 13625.3)||/||(1 - (809.9 + 4464.3) / 6055.2)|
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))|
|=||(287.5 / (287.5 + 4464.3))||/||(391 / (391 + 9833))|
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)|
|=||(593 / 8062.7)||/||(547.6 / 7306.7)|
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)|
|=||((5838.2 + 982.9) / 13625.3)||/||((2891.7 + 758.4) / 6055.2)|
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|
|=||(85.8 - -39.9||-||735.7)||/||13625.3|
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 -2.30 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