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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 -2.42.
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 * 0.9934||+||0.528 * 0.7894||+||0.404 * 0.9268||+||0.892 * 0.8189||+||0.115 * 0.6239|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2364||+||4.679 * -0.0771||-||0.327 * 0.8838|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $490 Mil.|
Revenue was 1583.6 + 1442.4 + 1647.4 + 1632.1 = $6,306 Mil.
Gross Profit was 299.5 + 299.3 + 329.4 + 326.1 = $1,254 Mil.
Total Current Assets was $857 Mil.
Total Assets was $13,000 Mil.
Property, Plant and Equipment(Net PPE) was $9,703 Mil.
Depreciation, Depletion and Amortization(DDA) was $774 Mil.
Selling, General & Admin. Expense(SGA) was $162 Mil.
Total Current Liabilities was $938 Mil.
Long-Term Debt was $4,778 Mil.
Net Income was -23.2 + -2.7 + 26.9 + 12.7 = $14 Mil.
Non Operating Income was -7.8 + 19.8 + -3.3 + -0.1 = $9 Mil.
Cash Flow from Operations was 216.2 + 241.3 + 339.2 + 211.3 = $1,008 Mil.
|Accounts Receivable was $603 Mil.
Revenue was 1699.4 + 1679.7 + 2032.8 + 2288.3 = $7,700 Mil.
Gross Profit was 325.5 + 300 + 288.7 + 295 = $1,209 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 $160 Mil.
Total Current Liabilities was $847 Mil.
Long-Term Debt was $5,796 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)|
|=||(490.1 / 6305.5)||/||(602.5 / 7700.2)|
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)|
|=||(1209.2 / 7700.2)||/||(1254.3 / 6305.5)|
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 - (856.7 + 9702.5) / 13000.1)||/||(1 - (963.5 + 9684.3) / 13352.9)|
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))|
|=||(468.1 / (468.1 + 9684.3))||/||(774.2 / (774.2 + 9702.5))|
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)|
|=||(162.4 / 6305.5)||/||(160.4 / 7700.2)|
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)|
|=||((4778.3 + 937.6) / 13000.1)||/||((5796.1 + 847) / 13352.9)|
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|
|=||(13.7 - 8.6||-||1008)||/||13000.1|
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 -3.20 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