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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 10-Year Beneish M-Score Range
Min: -2.99   Max: -2.05
Current: -2.39

-2.99
-2.05

During the past 13 years, the highest Beneish M-Score of Varian Medical Systems, Inc. was -2.05. The lowest was -2.99. 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 * 1.0677+0.528 * 0.9999+0.404 * 0.9763+0.892 * 1.0405+0.115 * 1.0903
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9808+4.679 * 0.0042-0.327 * 1.0906
=-2.39

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $708 Mil.
Revenue was 711.502 + 769.93 + 726.211 + 768.358 = $2,976 Mil.
Gross Profit was 309.579 + 328.496 + 310.465 + 319.638 = $1,268 Mil.
Total Current Assets was $2,606 Mil.
Total Assets was $3,391 Mil.
Property, Plant and Equipment(Net PPE) was $321 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $436 Mil.
Total Current Liabilities was $1,133 Mil.
Long-Term Debt was $425 Mil.
Net Income was 97.96 + 117.346 + 112.831 + 112.788 = $441 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 43.261 + 154.929 + 197.74 + 30.635 = $427 Mil.
Accounts Receivable was $637 Mil.
Revenue was 678.398 + 756.157 + 705.246 + 720.274 = $2,860 Mil.
Gross Profit was 291.088 + 323.27 + 307.611 + 296.696 = $1,219 Mil.
Total Current Assets was $2,228 Mil.
Total Assets was $2,939 Mil.
Property, Plant and Equipment(Net PPE) was $299 Mil.
Depreciation, Depletion and Amortization(DDA) was $64 Mil.
Selling, General & Admin. Expense(SGA) was $427 Mil.
Total Current Liabilities was $1,232 Mil.
Long-Term Debt was $6 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)
=(708.226 / 2976.001) / (637.473 / 2860.075)
=0.23797909 / 0.22288681
=1.0677

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)
=(328.496 / 2860.075) / (309.579 / 2976.001)
=0.42609547 / 0.42613494
=0.9999

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 - (2606.349 + 321.005) / 3391.234) / (1 - (2228.313 + 298.533) / 2938.564)
=0.13678797 / 0.14010857
=0.9763

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
=2976.001 / 2860.075
=1.0405

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))
=(63.952 / (63.952 + 298.533)) / (61.968 / (61.968 + 321.005))
=0.17642661 / 0.16180775
=1.0903

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)
=(435.69 / 2976.001) / (426.926 / 2860.075)
=0.14640116 / 0.14927091
=0.9808

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)
=((425 + 1133.144) / 3391.234) / ((6.25 + 1231.772) / 2938.564)
=0.45946225 / 0.4213017
=1.0906

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
=(440.925 - 0 - 426.565) / 3391.234
=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.

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

Sep04Sep05Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13
DSRI 0.96461.08941.16010.97840.81331.11670.95690.97421.00760.9627
GMI 0.9640.97781.03320.99420.98490.97730.99680.99491.02641.0036
AQI 1.06820.83461.05611.40370.87790.87661.00110.88930.99730.9041
SGI 1.18621.1191.15571.09841.17931.06971.06441.10191.0811.0484
DEPI 0.90821.20381.08171.17091.0970.99650.94630.98290.9111.0261
SGAI 0.97120.9721.06520.99430.98760.98250.92761.02151.02280.9906
LVGI 0.98131.04711.00491.06420.84430.91011.05711.14280.95281.0756
TATA -0.0572-0.03690.0225-0.0404-0.05030.0063-0.0432-0.0296-0.0228-0.0049
M-score -2.61-2.53-2.05-2.44-2.72-2.31-2.68-2.65-2.49-2.55

Varian Medical Systems, Inc. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.97421.05461.02350.95571.00761.02021.05851.01750.96271.0677
GMI 0.99491.01931.04711.03751.02641.01070.98860.99711.00360.9999
AQI 0.88931.02690.97350.97290.99730.92070.93990.9370.90410.9763
SGI 1.10191.1031.1041.09491.0811.08251.07161.05751.04841.0405
DEPI 0.98290.92290.92410.94310.9110.91710.91870.91861.02611.0903
SGAI 1.02151.010.99851.00461.02281.03391.02991.01080.99060.9808
LVGI 1.14281.19590.99631.12030.95280.98991.01670.96281.07561.0906
TATA -0.02960.0018-0.0105-0.0146-0.0228-0.0270.0001-0.0165-0.00490.0042
M-score -2.65-2.38-2.41-2.54-2.49-2.55-2.41-2.52-2.55-2.39
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