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Time Warner Inc (NYSE:TWX)
Beneish M-Score
-2.48 (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 -2.48 suggests that the company is not a manipulator.

TWX' s 10-Year Beneish M-Score Range
Min: -6.99   Max: 2.36
Current: -2.48

-6.99
2.36

During the past 13 years, the highest Beneish M-Score of Time Warner Inc was 2.36. The lowest was -6.99. And the median was -2.57.


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 * 0.9804+0.528 * 0.9996+0.404 * 0.99+0.892 * 1.0597+0.115 * 0.9519
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9629+4.679 * -0.0048-0.327 * 1.0251
=-2.48

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $7,371 Mil.
Revenue was 7545 + 8565 + 6856 + 7435 = $30,401 Mil.
Gross Profit was 3385 + 3789 + 3373 + 3214 = $13,761 Mil.
Total Current Assets was $13,994 Mil.
Total Assets was $68,199 Mil.
Property, Plant and Equipment(Net PPE) was $3,219 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,157 Mil.
Selling, General & Admin. Expense(SGA) was $6,508 Mil.
Total Current Liabilities was $8,278 Mil.
Long-Term Debt was $20,226 Mil.
Net Income was 1292 + 983 + 1183 + 771 = $4,229 Mil.
Non Operating Income was -6 + -49 + -20 + -59 = $-134 Mil.
Cash Flow from Operations was 1704 + 883 + 1187 + 915 = $4,689 Mil.
Accounts Receivable was $7,095 Mil.
Revenue was 6939 + 8164 + 6842 + 6744 = $28,689 Mil.
Gross Profit was 3189 + 3728 + 3185 + 2879 = $12,981 Mil.
Total Current Assets was $12,624 Mil.
Total Assets was $66,947 Mil.
Property, Plant and Equipment(Net PPE) was $3,769 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,104 Mil.
Selling, General & Admin. Expense(SGA) was $6,378 Mil.
Total Current Liabilities was $8,170 Mil.
Long-Term Debt was $19,125 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)
=(7371 / 30401) / (7095 / 28689)
=0.24245913 / 0.24730733
=0.9804

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)
=(3789 / 28689) / (3385 / 30401)
=0.45247307 / 0.45264958
=0.9996

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 - (13994 + 3219) / 68199) / (1 - (12624 + 3769) / 66947)
=0.74760627 / 0.75513466
=0.99

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
=30401 / 28689
=1.0597

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))
=(8104 / (8104 + 3769)) / (8157 / (8157 + 3219))
=0.68255706 / 0.71703586
=0.9519

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)
=(6508 / 30401) / (6378 / 28689)
=0.21407191 / 0.22231517
=0.9629

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)
=((20226 + 8278) / 68199) / ((19125 + 8170) / 66947)
=0.41795334 / 0.40771058
=1.0251

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
=(4229 - -134 - 4689) / 68199
=-0.0048

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 -2.48 suggests that the company will not 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.08391.15960.89021.13091.24241.18661.03071.00171.0761.0273
GMI 0.97590.98570.98491.05040.94010.99270.99551.00970.98130.9782
AQI 0.97511.00541.0130.97661.05980.89621.01490.99891.00521.0101
SGI 1.03611.02051.04431.06390.57050.95751.05911.07760.99151.0371
DEPI 0.92660.99471.15630.79920.58570.96243.34531.03280.28060.9885
SGAI 1.02511.23250.80920.81731.21530.94780.95250.97540.99190.9843
LVGI 0.87940.92991.35751.01450.81081.26061.00691.10811.01320.9862
TATA -0.028-0.0271-0.0285-0.0286-0.2077-0.0328-0.0057-0.0047-0.00440.0013
M-score -2.50-2.46-2.74-2.42-3.64-2.63-2.15-2.45-2.53-2.42

Time Warner Inc Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.00171.00381.04571.07341.0761.14681.08221.06741.02730.9804
GMI 1.00971.00170.9941.00130.98130.95970.95940.94820.97820.9996
AQI 0.99890.99621.00380.99111.00520.99771.00311.02141.01010.99
SGI 1.07761.07421.03881.00580.99150.98021.01371.02211.03711.0597
DEPI 1.0328-0.69381.030.31310.28060.27410.27190.9030.98850.9519
SGAI 0.97540.95990.97330.97340.99191.01310.98070.98140.98430.9629
LVGI 1.10811.10031.06271.03741.01320.98690.97960.97240.98621.0251
TATA -0.00470.0001-0.0068-0.0106-0.0044-0.0068-0.01030.00040.0013-0.0048
M-score -2.45-2.63-2.45-2.55-2.53-2.50-2.53-2.41-2.42-2.48
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