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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.
During the past 13 years, the highest Beneish M-Score of Varian Medical Systems Inc was -2.05. The lowest was -2.96. And the median was -2.54.
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 Varian Medical Systems 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 * 1.0115||+||0.528 * 0.9949||+||0.404 * 1.21||+||0.892 * 1.0363||+||0.115 * 1.0657|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1057||+||4.679 * -0.0135||-||0.327 * 1.0194|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $732 Mil.|
Revenue was 812.107 + 747.685 + 778.506 + 711.502 = $3,050 Mil.
Gross Profit was 340.059 + 323.727 + 328.31 + 309.579 = $1,302 Mil.
Total Current Assets was $2,494 Mil.
Total Assets was $3,357 Mil.
Property, Plant and Equipment(Net PPE) was $338 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $496 Mil.
Total Current Liabilities was $1,202 Mil.
Long-Term Debt was $388 Mil.
Net Income was 105.865 + 107.09 + 92.788 + 97.96 = $404 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 193.397 + 86.476 + 125.852 + 43.261 = $449 Mil.
|Accounts Receivable was $698 Mil.
Revenue was 769.93 + 726.211 + 768.358 + 678.398 = $2,943 Mil.
Gross Profit was 328.496 + 310.465 + 319.638 + 291.088 = $1,250 Mil.
Total Current Assets was $2,705 Mil.
Total Assets was $3,468 Mil.
Property, Plant and Equipment(Net PPE) was $315 Mil.
Depreciation, Depletion and Amortization(DDA) was $63 Mil.
Selling, General & Admin. Expense(SGA) was $433 Mil.
Total Current Liabilities was $1,161 Mil.
Long-Term Debt was $450 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(731.929 / 3049.8)||/||(698.254 / 2942.897)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(323.727 / 2942.897)||/||(340.059 / 3049.8)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2494.165 + 337.999) / 3357.29)||/||(1 - (2704.783 + 315.331) / 3468.474)|
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.
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))|
|=||(62.859 / (62.859 + 315.331))||/||(62.457 / (62.457 + 337.999))|
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)|
|=||(495.68 / 3049.8)||/||(432.589 / 2942.897)|
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)|
|=||((387.5 + 1201.654) / 3357.29)||/||((450 + 1160.579) / 3468.474)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(403.703 - 0||-||448.986)||/||3357.29|
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.
Varian Medical Systems Inc has a M-score of -2.44 suggests that the company will not be a manipulator.
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
Varian Medical Systems Inc Annual Data
Varian Medical Systems Inc Quarterly Data