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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 13 years, the highest Beneish M-Score of TRW Automotive Holdings Corp was -2.33. The lowest was -3.54. And the median was -2.53.
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 TRW Automotive Holdings 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 * 0.9756||+||0.528 * 0.9397||+||0.404 * 0.9857||+||0.892 * 1.006||+||0.115 * 0.9503|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 2.2733||+||4.679 * -0.0619||-||0.327 * 0.9803|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $2,432 Mil.|
Revenue was 4348 + 4156 + 4593 + 4442 = $17,539 Mil.
Gross Profit was 524 + 475 + 567 + 500 = $2,066 Mil.
Total Current Assets was $5,100 Mil.
Total Assets was $11,294 Mil.
Property, Plant and Equipment(Net PPE) was $2,645 Mil.
Depreciation, Depletion and Amortization(DDA) was $444 Mil.
Selling, General & Admin. Expense(SGA) was $1,459 Mil.
Total Current Liabilities was $4,344 Mil.
Long-Term Debt was $1,284 Mil.
Net Income was -360 + 189 + 265 + 199 = $293 Mil.
Non Operating Income was 6 + 12 + 10 + 10 = $38 Mil.
Cash Flow from Operations was 673 + 207 + 257 + -183 = $954 Mil.
|Accounts Receivable was $2,478 Mil.
Revenue was 4496 + 4212 + 4514 + 4213 = $17,435 Mil.
Gross Profit was 522 + 450 + 531 + 427 = $1,930 Mil.
Total Current Assets was $5,628 Mil.
Total Assets was $12,252 Mil.
Property, Plant and Equipment(Net PPE) was $2,718 Mil.
Depreciation, Depletion and Amortization(DDA) was $430 Mil.
Selling, General & Admin. Expense(SGA) was $638 Mil.
Total Current Liabilities was $4,755 Mil.
Long-Term Debt was $1,473 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)|
|=||(2432 / 17539)||/||(2478 / 17435)|
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)|
|=||(475 / 17435)||/||(524 / 17539)|
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 - (5100 + 2645) / 11294)||/||(1 - (5628 + 2718) / 12252)|
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))|
|=||(430 / (430 + 2718))||/||(444 / (444 + 2645))|
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)|
|=||(1459 / 17539)||/||(638 / 17435)|
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)|
|=||((1284 + 4344) / 11294)||/||((1473 + 4755) / 12252)|
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|
|=||(293 - 38||-||954)||/||11294|
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.
TRW Automotive Holdings Corp has a M-score of -3.04 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
TRW Automotive Holdings Corp Annual Data
TRW Automotive Holdings Corp Quarterly Data