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GuruFocus has detected 4 Warning Signs with Time Warner Inc $TWX.
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Time Warner Inc (NYSE:TWX)
Beneish M-Score
-2.32 (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 -2.32 suggests that the company is not a manipulator.

TWX' s Beneish M-Score Range Over the Past 10 Years
Min: -5.31   Max: 2.33
Current: -2.32

-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 * 1.1258+0.528 * 0.9639+0.404 * 0.9924+0.892 * 1.0427+0.115 * 0.9875
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0185+4.679 * 0.0066-0.327 * 0.9832
=-2.32

* 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 $8,699 Mil.
Revenue was 7891 + 7167 + 6952 + 7308 = $29,318 Mil.
Gross Profit was 3233 + 3294 + 3112 + 3303 = $12,942 Mil.
Total Current Assets was $13,485 Mil.
Total Assets was $65,966 Mil.
Property, Plant and Equipment(Net PPE) was $2,510 Mil.
Depreciation, Depletion and Amortization(DDA) was $669 Mil.
Selling, General & Admin. Expense(SGA) was $5,123 Mil.
Total Current Liabilities was $9,703 Mil.
Long-Term Debt was $22,392 Mil.
Net Income was 293 + 1467 + 952 + 1214 = $3,926 Mil.
Non Operating Income was -993 + -27 + -131 + -40 = $-1,191 Mil.
Cash Flow from Operations was 1149 + 1568 + 1213 + 753 = $4,683 Mil.
Accounts Receivable was $7,411 Mil.
Revenue was 7079 + 6564 + 7348 + 7127 = $28,118 Mil.
Gross Profit was 2727 + 3038 + 3160 + 3039 = $11,964 Mil.
Total Current Assets was $12,513 Mil.
Total Assets was $63,848 Mil.
Property, Plant and Equipment(Net PPE) was $2,596 Mil.
Depreciation, Depletion and Amortization(DDA) was $681 Mil.
Selling, General & Admin. Expense(SGA) was $4,824 Mil.
Total Current Liabilities was $8,002 Mil.
Long-Term Debt was $23,594 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)
=(8699 / 29318) / (7411 / 28118)
=0.29671192 / 0.26356782
=1.1258

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)
=(11964 / 28118) / (12942 / 29318)
=0.42549257 / 0.4414353
=0.9639

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 - (13485 + 2510) / 65966) / (1 - (12513 + 2596) / 63848)
=0.7575266 / 0.76335985
=0.9924

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
=29318 / 28118
=1.0427

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))
=(681 / (681 + 2596)) / (669 / (669 + 2510))
=0.20781202 / 0.21044354
=0.9875

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)
=(5123 / 29318) / (4824 / 28118)
=0.17473907 / 0.1715627
=1.0185

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)
=((22392 + 9703) / 65966) / ((23594 + 8002) / 63848)
=0.48653852 / 0.4948628
=0.9832

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
=(3926 - -1191 - 4683) / 65966
=0.0066

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 -2.32 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 local exchange's currency.

Time Warner Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.13091.24241.18661.03071.00171.22060.94671.02210.93411.1258
GMI 1.05040.94010.99270.99551.00971.02960.97451.03770.98650.9639
AQI 0.97661.05980.89621.01490.99891.00521.02680.97641.01890.9924
SGI 1.06390.57050.95751.05911.07760.87411.04491.03391.02771.0427
DEPI 1.49530.3130.96243.34530.29214.10680.86720.86621.04110.9875
SGAI 0.81731.21530.94780.95250.97540.85520.98111.01740.90441.0185
LVGI 1.01450.81081.26061.00691.10811.01320.9851.15321.02570.9832
TATA -0.0286-0.2077-0.0328-0.0057-0.00460.00220.0080.00430.00370.0066
M-score -2.34-3.67-2.63-2.15-2.54-1.98-2.46-2.47-2.49-2.32

Time Warner Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.91921.05041.01371.10051.0040.93410.99930.9881.09911.1258
GMI 1.01981.04691.03571.03760.97440.98650.96730.96270.99060.9639
AQI 0.9780.97641.01341.00521.01611.01891.02071.02270.99380.9924
SGI 1.12691.00611.02311.03691.0411.02771.02230.9880.9981.0427
DEPI 21.14150.86620.84251.01531.04281.04111.03751.00240.97440.9875
SGAI 1.08230.97261.0081.0010.96750.90440.93550.96410.97731.0185
LVGI 1.18281.15321.15651.08121.04081.02571.00790.98640.97830.9832
TATA 0.01460.00430.01250.0089-0.00040.00370.01050.00350.0040.0066
M-score -0.13-2.45-2.43-2.32-2.45-2.49-2.41-2.48-2.37-2.32
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