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Time Warner Inc (NYSE:TWX)
Beneish M-Score
-2.47 (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 -2.47 suggests that the company is not a manipulator.

TWX' s 10-Year Beneish M-Score Range
Min: -5.31   Max: 2.33
Current: -2.47

-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 -2.58.


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 * 1.0227+0.528 * 1.0363+0.404 * 0.977+0.892 * 1.0334+0.115 * 0.8662
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0186+4.679 * 0.0042-0.327 * 1.1554
=-2.47

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $7,720 Mil.
Revenue was 7525 + 6243 + 6788 + 7545 = $28,101 Mil.
Gross Profit was 3107 + 2562 + 2863 + 3385 = $11,917 Mil.
Total Current Assets was $13,180 Mil.
Total Assets was $63,259 Mil.
Property, Plant and Equipment(Net PPE) was $2,655 Mil.
Depreciation, Depletion and Amortization(DDA) was $733 Mil.
Selling, General & Admin. Expense(SGA) was $5,583 Mil.
Total Current Liabilities was $9,204 Mil.
Long-Term Debt was $21,376 Mil.
Net Income was 718 + 967 + 850 + 1292 = $3,827 Mil.
Non Operating Income was 13 + -135 + 6 + -6 = $-122 Mil.
Cash Flow from Operations was 1007 + 632 + 338 + 1704 = $3,681 Mil.
Accounts Receivable was $7,305 Mil.
Revenue was 7604 + 6042 + 6608 + 6939 = $27,193 Mil.
Gross Profit was 3177 + 2884 + 2700 + 3189 = $11,950 Mil.
Total Current Assets was $12,531 Mil.
Total Assets was $67,999 Mil.
Property, Plant and Equipment(Net PPE) was $3,291 Mil.
Depreciation, Depletion and Amortization(DDA) was $759 Mil.
Selling, General & Admin. Expense(SGA) was $5,304 Mil.
Total Current Liabilities was $8,388 Mil.
Long-Term Debt was $20,061 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)
=(7720 / 28101) / (7305 / 27193)
=0.27472332 / 0.26863531
=1.0227

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)
=(2562 / 27193) / (3107 / 28101)
=0.43945133 / 0.42407743
=1.0363

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 - (13180 + 2655) / 63259) / (1 - (12531 + 3291) / 67999)
=0.74967989 / 0.76732011
=0.977

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
=28101 / 27193
=1.0334

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))
=(759 / (759 + 3291)) / (733 / (733 + 2655))
=0.18740741 / 0.21635183
=0.8662

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)
=(5583 / 28101) / (5304 / 27193)
=0.1986762 / 0.1950502
=1.0186

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)
=((21376 + 9204) / 63259) / ((20061 + 8388) / 67999)
=0.48340948 / 0.4183738
=1.1554

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
=(3827 - -122 - 3681) / 63259
=0.0042

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 -2.47 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.15960.89021.13091.24241.18661.03071.00171.0761.07391.0221
GMI 0.98570.98491.05040.94010.99270.99551.00970.98131.02251.0377
AQI 1.00541.0130.97661.05980.89621.01490.99891.00521.02680.977
SGI 1.02051.04431.06390.57050.95751.05911.07760.99150.92111.0339
DEPI 0.99471.15631.49530.3130.96243.34531.03280.28063.58950.8662
SGAI 1.23250.80920.81731.21530.94780.95250.97540.99190.84591.0174
LVGI 0.92991.35751.01450.81081.26061.00691.10811.01320.9851.1554
TATA -0.0271-0.0285-0.0286-0.2077-0.0328-0.0057-0.0047-0.00440.0080.0043
M-score -2.46-2.74-2.34-3.67-2.63-2.15-2.45-2.53-2.09-2.47

Time Warner Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.07341.0761.14681.11361.13051.0451.07221.01781.02011.0227
GMI 1.00130.98130.95970.96980.96711.01351.03561.01911.05891.0363
AQI 0.99111.00520.99771.00311.02141.02680.990.97130.9780.977
SGI 1.00580.99150.98020.98510.96510.94650.9690.97991.01541.0334
DEPI 0.31310.28060.27410.27251.48143.58953.54343.15051.89860.8662
SGAI 0.97340.99191.01310.9490.9190.88480.86520.91050.94591.0186
LVGI 1.03741.01320.98690.97960.97240.9851.02511.12821.18281.1554
TATA -0.0106-0.0044-0.0068-0.01040.00430.0080.00190.01120.01450.0042
M-score -2.55-2.53-2.50-2.52-2.30-2.11-2.11-2.21-2.30-2.47
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