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Varian Medical Systems Inc (NYSE:VAR)
Beneish M-Score
-2.28 (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 -2.28 suggests that the company is not a manipulator.

VAR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.01   Max: -2
Current: -2.28

-3.01
-2

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.


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 * 1.1434+0.528 * 1.0568+0.404 * 1.2786+0.892 * 1.0137+0.115 * 1.0078
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9012+4.679 * -0.0163-0.327 * 1.0801
=-2.28

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

This Year (Dec15) TTM:Last Year (Dec14) TTM:
Accounts Receivable was $769 Mil.
Revenue was 757.133 + 817.84 + 784.011 + 759.406 = $3,118 Mil.
Gross Profit was 309.692 + 318.17 + 314.976 + 322.538 = $1,265 Mil.
Total Current Assets was $2,640 Mil.
Total Assets was $3,727 Mil.
Property, Plant and Equipment(Net PPE) was $373 Mil.
Depreciation, Depletion and Amortization(DDA) was $70 Mil.
Selling, General & Admin. Expense(SGA) was $481 Mil.
Total Current Liabilities was $1,589 Mil.
Long-Term Debt was $345 Mil.
Net Income was 89.027 + 98.696 + 113.506 + 105.969 = $407 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 77.222 + 153.389 + 183.901 + 53.314 = $468 Mil.
Accounts Receivable was $663 Mil.
Revenue was 737.854 + 812.107 + 747.685 + 778.506 = $3,076 Mil.
Gross Profit was 327.008 + 340.059 + 323.727 + 328.31 = $1,319 Mil.
Total Current Assets was $2,552 Mil.
Total Assets was $3,396 Mil.
Property, Plant and Equipment(Net PPE) was $335 Mil.
Depreciation, Depletion and Amortization(DDA) was $63 Mil.
Selling, General & Admin. Expense(SGA) was $527 Mil.
Total Current Liabilities was $1,257 Mil.
Long-Term Debt was $375 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)
=(768.548 / 3118.39) / (663.041 / 3076.152)
=0.24645667 / 0.21554234
=1.1434

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)
=(318.17 / 3076.152) / (309.692 / 3118.39)
=0.42881626 / 0.40577862
=1.0568

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 - (2640.216 + 372.858) / 3726.662) / (1 - (2552.365 + 335.325) / 3396.302)
=0.19148181 / 0.14975464
=1.2786

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
=3118.39 / 3076.152
=1.0137

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))
=(63.463 / (63.463 + 335.325)) / (69.919 / (69.919 + 372.858))
=0.15913969 / 0.15791019
=1.0078

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)
=(481.093 / 3118.39) / (526.58 / 3076.152)
=0.15427608 / 0.1711814
=0.9012

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)
=((345 + 1589.055) / 3726.662) / ((375 + 1256.93) / 3396.302)
=0.51897784 / 0.48050203
=1.0801

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
=(407.198 - 0 - 467.826) / 3726.662
=-0.0163

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 -2.28 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 1.16010.96650.82331.11670.95690.97421.00760.96271.01151.0365
GMI 1.03321.00410.97510.97730.99680.99491.02641.00360.99491.0312
AQI 1.05611.40370.87790.87661.00110.88930.99730.90411.211.2366
SGI 1.15571.11191.1651.06971.06441.10191.0811.04841.03631.0162
DEPI 1.08171.17091.0970.99650.94630.98290.9111.02611.06571.0191
SGAI 1.065210.98190.98250.92761.02151.02280.99061.10570.9699
LVGI 1.00491.06420.84430.91011.05711.14280.95281.07561.01941.0094
TATA 0.0287-0.0361-0.04690.0063-0.0432-0.0296-0.0228-0.0049-0.0135-0.0161
M-score -2.02-2.42-2.71-2.31-2.68-2.65-2.49-2.55-2.44-2.39

Varian Medical Systems Inc Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 1.06771.05881.1111.01150.90570.87970.87651.03651.14341.1809
GMI 0.99990.99850.99050.99490.99370.99531.01711.03121.05681.063
AQI 0.97630.95971.05371.211.09481.13821.01741.23661.27861.2034
SGI 1.04051.02681.02681.03631.03371.02371.02851.01621.01371.0199
DEPI 1.09031.12731.13811.06571.01680.96710.96421.01911.00781.3018
SGAI 0.98081.03811.09391.10571.16931.06320.98350.96990.90120.9444
LVGI 1.09061.12041.15081.01941.04580.99621.00151.00941.08011.0994
TATA 0.0042-0.0290.0013-0.0135-0.02520-0.0257-0.0161-0.0163-0.0042
M-score -2.39-2.59-2.38-2.44-2.66-2.53-2.67-2.39-2.28-2.19
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