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Beneish M-Score 121.04 higher than -2.22, which implies that it might have manipulated its financial results.
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 6 years, the highest Beneish M-Score of Tesaro Inc was 121.04. The lowest was 121.04. And the median was 121.04.
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 Tesaro Inc 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 * 0.0557||+||0.528 * 0.1661||+||0.404 * 0.3487||+||0.892 * 141.3975||+||0.115 * 0.8514|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.0142||+||4.679 * -0.1061||-||0.327 * 0.3773|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $5.34 Mil.|
Revenue was 4.225 + 3.73 + 36.561 + 0.307 = $44.82 Mil.
Gross Profit was 3.243 + 2.842 + 35.86 + -0.233 = $41.71 Mil.
Total Current Assets was $814.84 Mil.
Total Assets was $839.85 Mil.
Property, Plant and Equipment(Net PPE) was $6.64 Mil.
Depreciation, Depletion and Amortization(DDA) was $3.11 Mil.
Selling, General & Admin. Expense(SGA) was $158.45 Mil.
Total Current Liabilities was $76.77 Mil.
Long-Term Debt was $131.78 Mil.
Net Income was -136.942 + -101.153 + -58.407 + -90.767 = $-387.27 Mil.
Non Operating Income was -10.45 + 0 + 0 + 0 = $-10.45 Mil.
Cash Flow from Operations was -83.175 + -94.567 + -42.313 + -67.616 = $-287.67 Mil.
|Accounts Receivable was $0.68 Mil.
Revenue was 0.23 + 0.087 + 0 + 0 = $0.32 Mil.
Gross Profit was -0.038 + 0.087 + 0 + 0 = $0.05 Mil.
Total Current Assets was $236.49 Mil.
Total Assets was $255.28 Mil.
Property, Plant and Equipment(Net PPE) was $2.78 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.04 Mil.
Selling, General & Admin. Expense(SGA) was $78.70 Mil.
Total Current Liabilities was $46.68 Mil.
Long-Term Debt was $121.33 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)|
|=||(5.343 / 44.823)||/||(0.679 / 0.317)|
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)|
|=||(0.049 / 0.317)||/||(41.712 / 44.823)|
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 - (814.839 + 6.64) / 839.845)||/||(1 - (236.491 + 2.779) / 255.281)|
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))|
|=||(1.037 / (1.037 + 2.779))||/||(3.113 / (3.113 + 6.64))|
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)|
|=||(158.452 / 44.823)||/||(78.701 / 0.317)|
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)|
|=||((131.775 + 76.773) / 839.845)||/||((121.325 + 46.681) / 255.281)|
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|
|=||(-387.269 - -10.45||-||-287.671)||/||839.845|
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.
Tesaro Inc has a M-score of 121.04 signals that the company is likely to 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
Tesaro Inc Annual Data
Tesaro Inc Quarterly Data