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Varian Medical Systems Inc (NYSE:VAR)
Beneish M-Score
-2.39 (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.

Varian Medical Systems Inc has a M-score of -2.39 suggests that the company is not a manipulator.

VAR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.01   Max: -2.05
Current: -2.39

-3.01
-2.05

During the past 13 years, the highest Beneish M-Score of Varian Medical Systems Inc was -2.05. The lowest was -3.01. And the median was -2.52.


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 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 * 1.0365+0.528 * 1.0312+0.404 * 1.2366+0.892 * 1.0162+0.115 * 1.0191
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9699+4.679 * -0.0161-0.327 * 1.0094
=-2.39

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $771 Mil.
Revenue was 817.84 + 784.011 + 759.406 + 737.854 = $3,099 Mil.
Gross Profit was 318.17 + 314.976 + 322.538 + 327.008 = $1,283 Mil.
Total Current Assets was $2,525 Mil.
Total Assets was $3,601 Mil.
Property, Plant and Equipment(Net PPE) was $379 Mil.
Depreciation, Depletion and Amortization(DDA) was $69 Mil.
Selling, General & Admin. Expense(SGA) was $489 Mil.
Total Current Liabilities was $1,383 Mil.
Long-Term Debt was $338 Mil.
Net Income was 98.696 + 113.506 + 105.969 + 93.314 = $411 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 153.389 + 183.901 + 53.314 + 78.952 = $470 Mil.
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.



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)
=(770.92 / 3099.111) / (731.929 / 3049.8)
=0.24875521 / 0.23999246
=1.0365

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)
=(314.976 / 3049.8) / (318.17 / 3099.111)
=0.42680668 / 0.41389031
=1.0312

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 - (2525.045 + 379.215) / 3600.748) / (1 - (2494.165 + 337.999) / 3357.29)
=0.1934287 / 0.15641366
=1.2366

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
=3099.111 / 3049.8
=1.0162

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))
=(62.457 / (62.457 + 337.999)) / (68.52 / (68.52 + 379.215))
=0.1559647 / 0.15303695
=1.0191

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)
=(488.514 / 3099.111) / (495.68 / 3049.8)
=0.15763037 / 0.16252869
=0.9699

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)
=((337.5 + 1382.904) / 3600.748) / ((387.5 + 1201.654) / 3357.29)
=0.47779073 / 0.47334427
=1.0094

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
=(411.485 - 0 - 469.556) / 3600.748
=-0.0161

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 -2.39 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.

Varian Medical Systems Inc Annual Data

Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15
DSRI 1.16010.97840.81331.11670.95690.97421.00760.96271.01151.0365
GMI 1.03320.99420.98490.97730.99680.99491.02641.00360.99491.0312
AQI 1.05611.40370.87790.87661.00110.88930.99730.90411.211.2366
SGI 1.15571.09841.17931.06971.06441.10191.0811.04841.03631.0162
DEPI 1.08171.17091.0970.99650.94630.98290.9111.02611.06571.0191
SGAI 1.06520.99430.98760.98250.92761.02151.02280.99061.10570.9699
LVGI 1.00491.06420.84430.91011.05711.14280.95281.07561.01941.0094
TATA 0.0225-0.0404-0.05030.0063-0.0432-0.0296-0.0228-0.0049-0.0135-0.0161
M-score -2.05-2.44-2.72-2.31-2.68-2.65-2.49-2.55-2.44-2.39

Varian Medical Systems Inc Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 0.96271.06771.05881.1111.01150.90570.87970.87651.03651.1434
GMI 1.00360.99990.99850.99050.99490.99370.99531.01711.03121.0568
AQI 0.90410.97630.95971.05371.211.09481.13821.01741.23661.2786
SGI 1.04841.04051.02681.02681.03631.03371.02371.02851.01621.0137
DEPI 1.02611.09031.12731.13811.06571.01680.96710.96421.01911.0078
SGAI 0.99060.98081.03811.09391.10571.16931.06320.98350.96990.9012
LVGI 1.07561.09061.12041.15081.01941.04580.99621.00151.00941.0801
TATA -0.00490.0042-0.0290.0013-0.0135-0.02520-0.0257-0.0161-0.0163
M-score -2.55-2.39-2.59-2.38-2.44-2.66-2.53-2.67-2.39-2.28
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