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Time Warner Inc (NYSE:TWX)
Beneish M-Score
-1.98 (As of Today)

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.

Time Warner Inc has a M-score of -1.98 signals that the company is a manipulator.

TWX' s 10-Year Beneish M-Score Range
Min: -5.31   Max: 2.33
Current: -1.98

-5.31
2.33

During the past 13 years, the highest Beneish M-Score of Time Warner Inc was 2.33. The lowest was -5.31. And the median was -2.50.


Definition

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 Time Warner 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 * 1.2022+0.528 * 1.0725+0.404 * 1.0052+0.892 * 0.9492+0.115 * 3.497
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8838+4.679 * 0.0087-0.327 * 1.0812
=-1.98

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun15) TTM:Last Year (Jun14) TTM:
Accounts Receivable was $8,004 Mil.
Revenue was 7348 + 7127 + 7525 + 6243 = $28,243 Mil.
Gross Profit was 3160 + 3039 + 3107 + 2562 = $11,868 Mil.
Total Current Assets was $13,810 Mil.
Total Assets was $63,425 Mil.
Property, Plant and Equipment(Net PPE) was $2,567 Mil.
Depreciation, Depletion and Amortization(DDA) was $699 Mil.
Selling, General & Admin. Expense(SGA) was $5,140 Mil.
Total Current Liabilities was $9,195 Mil.
Long-Term Debt was $22,281 Mil.
Net Income was 971 + 970 + 718 + 967 = $3,626 Mil.
Non Operating Income was -125 + -117 + 13 + -135 = $-364 Mil.
Cash Flow from Operations was 791 + 1009 + 1007 + 632 = $3,439 Mil.
Accounts Receivable was $7,014 Mil.
Revenue was 6788 + 7545 + 8565 + 6856 = $29,754 Mil.
Gross Profit was 2863 + 3385 + 3789 + 3373 = $13,410 Mil.
Total Current Assets was $14,183 Mil.
Total Assets was $64,490 Mil.
Property, Plant and Equipment(Net PPE) was $2,716 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,081 Mil.
Selling, General & Admin. Expense(SGA) was $6,127 Mil.
Total Current Liabilities was $7,207 Mil.
Long-Term Debt was $22,395 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(8004 / 28243) / (7014 / 29754)
=0.28339766 / 0.23573301
=1.2022

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(3039 / 29754) / (3160 / 28243)
=0.4506957 / 0.42021032
=1.0725

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (13810 + 2567) / 63425) / (1 - (14183 + 2716) / 64490)
=0.74178952 / 0.73795937
=1.0052

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=28243 / 29754
=0.9492

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))
=(8081 / (8081 + 2716)) / (699 / (699 + 2567))
=0.74844864 / 0.21402327
=3.497

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)
=(5140 / 28243) / (6127 / 29754)
=0.181992 / 0.20592189
=0.8838

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)
=((22281 + 9195) / 63425) / ((22395 + 7207) / 64490)
=0.49627119 / 0.4590169
=1.0812

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(3626 - -364 - 3439) / 63425
=0.0087

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.

Time Warner Inc has a M-score of -1.98 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Time Warner Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.15960.89021.13091.24241.01641.20331.00171.0761.02731.0686
GMI 0.98570.98491.05040.94010.99090.99731.00970.98130.97821.0846
AQI 1.00541.0130.97661.05980.90661.00330.99891.00581.00950.9932
SGI 1.02051.04431.06390.57050.97241.04281.07760.99151.03710.9182
DEPI 0.99471.15631.49530.3130.95390.99323.50961.02280.27123.1455
SGAI 1.23250.80920.81731.21530.94550.95480.97540.99190.98430.8743
LVGI 0.92991.35751.01450.81081.23131.03081.10811.01110.98831.154
TATA -0.0271-0.0285-0.0286-0.2077-0.0325-0.0057-0.0047-0.00440.00130.0043
M-score -2.46-2.74-2.34-3.67-2.76-2.28-2.17-2.45-2.50-2.21

Time Warner Inc Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 1.14681.08221.06741.02730.98040.98481.04481.04031.1391.2022
GMI 0.95970.95940.94820.97820.99961.00561.06261.07361.08291.0725
AQI 0.99771.00311.02141.00950.990.97130.9780.99321.01341.0052
SGI 0.98021.01371.02211.03711.05971.01270.99140.94310.91060.9492
DEPI -1.54130.96210.29840.27120.26740.25911.20873.14553.44963.497
SGAI 1.01310.98070.98140.98430.96290.94980.92330.91560.86210.8838
LVGI 0.98690.97960.97240.98831.02511.12821.18281.1541.15651.0812
TATA -0.0068-0.01030.00040.0013-0.00480.00410.01140.00420.01210.0087
M-score -2.71-2.45-2.48-2.50-2.56-2.59-2.39-2.23-2.07-1.98
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