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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 * 1.181||+||0.528 * 1.063||+||0.404 * 1.2034||+||0.892 * 1.0199||+||0.115 * 0.9985|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9442||+||4.679 * -0.0125||-||0.327 * 1.0994|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $853 Mil.|
Revenue was 758.767 + 757.133 + 817.84 + 784.011 = $3,118 Mil.
Gross Profit was 317.218 + 309.692 + 318.17 + 314.976 = $1,260 Mil.
Total Current Assets was $2,773 Mil.
Total Assets was $3,866 Mil.
Property, Plant and Equipment(Net PPE) was $374 Mil.
Depreciation, Depletion and Amortization(DDA) was $73 Mil.
Selling, General & Admin. Expense(SGA) was $485 Mil.
Total Current Liabilities was $1,694 Mil.
Long-Term Debt was $313 Mil.
Net Income was 96.971 + 89.027 + 98.696 + 113.506 = $398 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 31.905 + 77.222 + 153.389 + 183.901 = $446 Mil.
|Accounts Receivable was $708 Mil.
Revenue was 759.406 + 737.854 + 812.107 + 747.685 = $3,057 Mil.
Gross Profit was 322.538 + 327.008 + 340.059 + 323.727 = $1,313 Mil.
Total Current Assets was $2,590 Mil.
Total Assets was $3,460 Mil.
Property, Plant and Equipment(Net PPE) was $335 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $504 Mil.
Total Current Liabilities was $1,271 Mil.
Long-Term Debt was $363 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)|
|=||(852.634 / 3117.751)||/||(707.927 / 3057.052)|
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)|
|=||(1313.332 / 3057.052)||/||(1260.056 / 3117.751)|
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 - (2773.217 + 374.356) / 3866.258)||/||(1 - (2590.351 + 334.807) / 3459.536)|
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))|
|=||(65.215 / (65.215 + 334.807))||/||(73.051 / (73.051 + 374.356))|
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)|
|=||(485.03 / 3117.751)||/||(503.681 / 3057.052)|
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)|
|=||((312.5 + 1694.14) / 3866.258)||/||((362.5 + 1270.768) / 3459.536)|
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|
|=||(398.2 - 0||-||446.417)||/||3866.258|
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 -2.26 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