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Varian Medical Systems Inc (NYSE:VAR)
Beneish M-Score
-2.38 (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 -2.38 suggests that the company is not a manipulator.

VAR' s 10-Year Beneish M-Score Range
Min: -2.99   Max: -2.05
Current: -2.38

-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 * 1.111+0.528 * 0.9905+0.404 * 1.0537+0.892 * 1.0268+0.115 * 1.1381
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0939+4.679 * 0.0013-0.327 * 1.1508
=-2.38

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $747 Mil.
Revenue was 747.685 + 778.506 + 711.502 + 769.93 = $3,008 Mil.
Gross Profit was 323.727 + 328.31 + 309.579 + 328.496 = $1,290 Mil.
Total Current Assets was $2,625 Mil.
Total Assets was $3,475 Mil.
Property, Plant and Equipment(Net PPE) was $329 Mil.
Depreciation, Depletion and Amortization(DDA) was $61 Mil.
Selling, General & Admin. Expense(SGA) was $485 Mil.
Total Current Liabilities was $1,210 Mil.
Long-Term Debt was $400 Mil.
Net Income was 107.09 + 92.788 + 97.96 + 117.346 = $415 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 86.476 + 125.852 + 43.261 + 154.929 = $411 Mil.
Accounts Receivable was $655 Mil.
Revenue was 726.211 + 768.358 + 678.398 + 756.157 = $2,929 Mil.
Gross Profit was 310.465 + 319.638 + 291.088 + 323.27 = $1,244 Mil.
Total Current Assets was $2,317 Mil.
Total Assets was $3,059 Mil.
Property, Plant and Equipment(Net PPE) was $306 Mil.
Depreciation, Depletion and Amortization(DDA) was $66 Mil.
Selling, General & Admin. Expense(SGA) was $431 Mil.
Total Current Liabilities was $1,232 Mil.
Long-Term Debt was $0 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)
=(747.346 / 3007.623) / (655.13 / 2929.124)
=0.24848394 / 0.22366073
=1.111

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)
=(328.31 / 2929.124) / (323.727 / 3007.623)
=0.42485774 / 0.42894738
=0.9905

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 - (2624.756 + 328.646) / 3474.875) / (1 - (2317.039 + 306.341) / 3059.055)
=0.15006957 / 0.14242143
=1.0537

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
=3007.623 / 2929.124
=1.0268

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))
=(66.332 / (66.332 + 306.341)) / (60.926 / (60.926 + 328.646))
=0.17798982 / 0.15639214
=1.1381

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)
=(484.585 / 3007.623) / (431.444 / 2929.124)
=0.16111893 / 0.14729455
=1.0939

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)
=((400 + 1209.938) / 3474.875) / ((0 + 1231.612) / 3059.055)
=0.46330818 / 0.40261192
=1.1508

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
=(415.184 - 0 - 410.518) / 3474.875
=0.0013

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 -2.38 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

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 1.02350.95571.00761.02021.05851.01750.96271.06771.05881.111
GMI 1.04711.03751.02641.01070.98860.99711.00360.99990.99850.9905
AQI 0.97350.97290.99730.92070.93990.9370.90410.97630.95971.0537
SGI 1.1041.09491.0811.08251.07161.05751.04841.04051.02681.0268
DEPI 0.92410.94310.9110.91710.91870.91861.02611.09031.12731.1381
SGAI 0.99851.00461.02281.03391.02991.01080.99060.98081.03811.0939
LVGI 0.99631.12030.95280.98991.01670.96281.07561.09061.12041.1508
TATA -0.0105-0.0146-0.0228-0.0270.0001-0.0165-0.00490.0042-0.0290.0013
M-score -2.41-2.54-2.49-2.55-2.41-2.52-2.55-2.39-2.59-2.38
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