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Time Warner Inc (NYSE:TWX)
Beneish M-Score
-2.53 (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 -2.53 suggests that the company is not a manipulator.

TWX' s 10-Year Beneish M-Score Range
Min: -6.99   Max: 2.36
Current: -2.53

-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 -2.53.


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 * 0.957+0.528 * 0.9948+0.404 * 0.9713+0.892 * 1.0421+0.115 * 0.9129
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9814+4.679 * 0.0041-0.327 * 1.1282
=-2.53

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
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 $8,143 Mil.
Selling, General & Admin. Expense(SGA) was $6,127 Mil.
Total Current Liabilities was $7,207 Mil.
Long-Term Debt was $22,395 Mil.
Net Income was 850 + 1292 + 983 + 1183 = $4,308 Mil.
Non Operating Income was 6 + -6 + -49 + -20 = $-69 Mil.
Cash Flow from Operations was 338 + 1704 + 883 + 1187 = $4,112 Mil.
Accounts Receivable was $7,033 Mil.
Revenue was 6608 + 6939 + 8164 + 6842 = $28,553 Mil.
Gross Profit was 2700 + 3189 + 3728 + 3185 = $12,802 Mil.
Total Current Assets was $12,229 Mil.
Total Assets was $66,322 Mil.
Property, Plant and Equipment(Net PPE) was $3,704 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,039 Mil.
Selling, General & Admin. Expense(SGA) was $5,991 Mil.
Total Current Liabilities was $7,854 Mil.
Long-Term Debt was $19,129 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)
=(7014 / 29754) / (7033 / 28553)
=0.23573301 / 0.24631387
=0.957

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)
=(3385 / 28553) / (2863 / 29754)
=0.44835919 / 0.4506957
=0.9948

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 - (14183 + 2716) / 64490) / (1 - (12229 + 3704) / 66322)
=0.73795937 / 0.75976297
=0.9713

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
=29754 / 28553
=1.0421

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))
=(8039 / (8039 + 3704)) / (8143 / (8143 + 2716))
=0.68457805 / 0.74988489
=0.9129

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)
=(6127 / 29754) / (5991 / 28553)
=0.20592189 / 0.20982033
=0.9814

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)
=((22395 + 7207) / 64490) / ((19129 + 7854) / 66322)
=0.4590169 / 0.40684841
=1.1282

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
=(4308 - -69 - 4112) / 64490
=0.0041

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 -2.53 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 1.08391.15960.89021.13091.24241.01641.20331.00171.0761.0273
GMI 0.97590.98570.98491.05040.94010.99090.99731.00970.98130.9782
AQI 0.97511.00541.0130.97661.05980.90661.00330.99891.00521.0101
SGI 1.03611.02051.04431.06390.57050.97241.04281.07760.99151.0371
DEPI 0.92660.99471.15630.79920.58570.95390.99323.50960.28060.9885
SGAI 1.02511.23250.80920.81731.21530.94550.95480.97540.99190.9843
LVGI 0.87940.92991.35751.01450.81081.23131.03081.10811.01320.9862
TATA -0.028-0.0271-0.0285-0.0286-0.2077-0.0325-0.0057-0.0047-0.00440.0013
M-score -2.50-2.46-2.74-2.42-3.64-2.76-2.28-2.17-2.53-2.42

Time Warner Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 1.00381.04571.07341.0761.14681.11361.09831.05661.00780.957
GMI 1.00170.9941.00130.98130.95970.96980.9580.98851.01010.9948
AQI 0.99621.00380.99111.00520.99771.00311.02141.01010.990.9713
SGI 1.07421.03881.00580.99150.98020.98510.99341.00831.03081.0421
DEPI 3.28762.86170.69430.28060.27410.27250.9030.98850.95190.9129
SGAI 0.95990.97330.97340.99191.01310.9490.94980.95310.93220.9814
LVGI 1.10031.06271.03741.01320.98690.97960.97240.98621.02511.1282
TATA 0.0001-0.0068-0.0106-0.0044-0.0068-0.01040.00030.0013-0.00480.0041
M-score -2.17-2.24-2.50-2.53-2.50-2.52-2.40-2.41-2.47-2.53
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