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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 -2.00. The lowest was -3.01. And the median was -2.51.
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 * 1.2356||+||0.528 * 1.0198||+||0.404 * 1.4639||+||0.892 * 1.0096||+||0.115 * 0.969|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0615||+||4.679 * 0.0069||-||0.327 * 1.0994|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $840 Mil.|
Revenue was 789.419 + 758.767 + 757.133 + 817.84 = $3,123 Mil.
Gross Profit was 346.43 + 317.218 + 309.692 + 318.17 = $1,292 Mil.
Total Current Assets was $2,547 Mil.
Total Assets was $3,759 Mil.
Property, Plant and Equipment(Net PPE) was $372 Mil.
Depreciation, Depletion and Amortization(DDA) was $75 Mil.
Selling, General & Admin. Expense(SGA) was $525 Mil.
Total Current Liabilities was $1,618 Mil.
Long-Term Debt was $300 Mil.
Net Income was 98.795 + 96.971 + 89.027 + 98.696 = $383 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 95.217 + 31.905 + 77.222 + 153.389 = $358 Mil.
|Accounts Receivable was $674 Mil.
Revenue was 784.011 + 759.406 + 737.854 + 812.107 = $3,093 Mil.
Gross Profit was 314.976 + 322.538 + 327.008 + 340.059 = $1,305 Mil.
Total Current Assets was $2,649 Mil.
Total Assets was $3,532 Mil.
Property, Plant and Equipment(Net PPE) was $343 Mil.
Depreciation, Depletion and Amortization(DDA) was $66 Mil.
Selling, General & Admin. Expense(SGA) was $490 Mil.
Total Current Liabilities was $1,289 Mil.
Long-Term Debt was $350 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)|
|=||(840.437 / 3123.159)||/||(673.706 / 3093.378)|
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)|
|=||(1304.581 / 3093.378)||/||(1291.51 / 3123.159)|
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 - (2546.623 + 372.496) / 3759.452)||/||(1 - (2648.935 + 343.417) / 3531.579)|
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))|
|=||(66.486 / (66.486 + 343.417))||/||(74.886 / (74.886 + 372.496))|
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)|
|=||(525.317 / 3123.159)||/||(490.168 / 3093.378)|
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)|
|=||((300 + 1617.711) / 3759.452)||/||((350 + 1288.646) / 3531.579)|
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|
|=||(383.489 - 0||-||357.733)||/||3759.452|
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 -2.07 signals that the company is likely to 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