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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 -2.02. The lowest was -3.01. And the median was -2.50.
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 * 1.1142||+||0.528 * 0.9784||+||0.404 * 0.9544||+||0.892 * 1.0383||+||0.115 * 0.8801|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0982||+||4.679 * 0.0121||-||0.327 * 1.0403|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $892 Mil.|
Revenue was 912.481 + 789.419 + 758.767 + 757.133 = $3,218 Mil.
Gross Profit was 387.96 + 346.43 + 317.218 + 309.692 = $1,361 Mil.
Total Current Assets was $2,616 Mil.
Total Assets was $3,816 Mil.
Property, Plant and Equipment(Net PPE) was $379 Mil.
Depreciation, Depletion and Amortization(DDA) was $80 Mil.
Selling, General & Admin. Expense(SGA) was $557 Mil.
Total Current Liabilities was $1,614 Mil.
Long-Term Debt was $288 Mil.
Net Income was 117.507 + 98.795 + 96.971 + 89.027 = $402 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 151.956 + 95.217 + 31.905 + 77.222 = $356 Mil.
|Accounts Receivable was $771 Mil.
Revenue was 817.829 + 784.011 + 759.406 + 737.854 = $3,099 Mil.
Gross Profit was 318.178 + 314.976 + 322.538 + 327.008 = $1,283 Mil.
Total Current Assets was $2,393 Mil.
Total Assets was $3,579 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 $1,377 Mil.
Long-Term Debt was $338 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)|
|=||(891.8 / 3217.8)||/||(770.9 / 3099.1)|
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)|
|=||(1282.7 / 3099.1)||/||(1361.3 / 3217.8)|
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 - (2616 + 379.2) / 3816)||/||(1 - (2393 + 379.2) / 3578.7)|
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))|
|=||(68.5 / (68.5 + 379.2))||/||(79.8 / (79.8 + 379.2))|
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)|
|=||(557 / 3217.8)||/||(488.5 / 3099.1)|
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)|
|=||((287.5 + 1614) / 3816)||/||((337.5 + 1376.7) / 3578.7)|
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|
|=||(402.3 - 0||-||356.3)||/||3816|
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 -2.36 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