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Varian Medical Systems Inc (NYSE:VAR)
Beneish M-Score
-2.67 (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 -2.67 suggests that the company is not a manipulator.

VAR' s 10-Year Beneish M-Score Range
Min: -3.01   Max: -2
Current: -2.67

-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 -2.52.


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 * 0.8765+0.528 * 1.0171+0.404 * 1.0174+0.892 * 1.0285+0.115 * 0.9642
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9835+4.679 * -0.0257-0.327 * 1.0015
=-2.67

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

This Year (Jun15) TTM:Last Year (Jun14) TTM:
Accounts Receivable was $674 Mil.
Revenue was 784.011 + 759.406 + 737.854 + 812.107 = $3,093 Mil.
Gross Profit was 314.976 + 322.538 + 327.008 + 340.059 = $1,305 Mil.
Total Current Assets was $2,649 Mil.
Total Assets was $3,532 Mil.
Property, Plant and Equipment(Net PPE) was $343 Mil.
Depreciation, Depletion and Amortization(DDA) was $66 Mil.
Selling, General & Admin. Expense(SGA) was $490 Mil.
Total Current Liabilities was $1,289 Mil.
Long-Term Debt was $350 Mil.
Net Income was 113.506 + 105.969 + 93.314 + 105.865 = $419 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 183.901 + 53.314 + 78.952 + 193.397 = $510 Mil.
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.



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)
=(673.706 / 3093.378) / (747.346 / 3007.623)
=0.21778974 / 0.24848394
=0.8765

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)
=(322.538 / 3007.623) / (314.976 / 3093.378)
=0.42894738 / 0.42173346
=1.0171

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 - (2648.935 + 343.417) / 3531.579) / (1 - (2624.756 + 328.646) / 3474.875)
=0.15268723 / 0.15006957
=1.0174

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
=3093.378 / 3007.623
=1.0285

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))
=(60.926 / (60.926 + 328.646)) / (66.486 / (66.486 + 343.417))
=0.15639214 / 0.16219935
=0.9642

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)
=(490.168 / 3093.378) / (484.585 / 3007.623)
=0.15845719 / 0.16111893
=0.9835

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)
=((350 + 1288.646) / 3531.579) / ((400 + 1209.938) / 3474.875)
=0.46399812 / 0.46330818
=1.0015

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
=(418.654 - 0 - 509.564) / 3531.579
=-0.0257

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 -2.67 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

Sep05Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14
DSRI 1.08941.16010.96650.82331.11670.95690.97421.00760.96271.0115
GMI 0.97651.03321.00410.97510.97730.99680.99491.02641.00360.9949
AQI 0.83461.05611.40370.87790.87661.00110.88930.99730.90411.21
SGI 1.1191.15571.11191.1651.06971.06441.10191.0811.04841.0363
DEPI 1.20381.08171.17091.0970.99650.94630.98290.9111.02611.0657
SGAI 0.9721.065210.98190.98250.92761.02151.02280.99061.1057
LVGI 1.04711.00491.06420.84430.91011.05711.14280.95281.07561.0194
TATA -0.03690.0225-0.0404-0.05030.0063-0.0432-0.0296-0.0228-0.0049-0.0135
M-score -2.53-2.05-2.44-2.73-2.31-2.68-2.65-2.49-2.55-2.44

Varian Medical Systems Inc Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 1.05851.01750.96271.06771.05881.1111.01150.90570.87970.8765
GMI 0.98860.99711.00360.99990.99850.99050.99490.99370.99531.0171
AQI 0.93990.9370.90410.97630.95971.05371.211.09481.13821.0174
SGI 1.07161.05751.04841.04051.02681.02681.03631.03371.02371.0285
DEPI 0.91870.91861.02611.09031.12731.13811.06571.01680.96710.9642
SGAI 1.02991.01080.99060.98081.03811.09391.10571.16931.06320.9835
LVGI 1.01670.96281.07561.09061.12041.15081.01941.04580.99621.0015
TATA 0.0001-0.0165-0.00490.0042-0.0290.0013-0.0135-0.02520-0.0257
M-score -2.41-2.52-2.55-2.39-2.59-2.38-2.44-2.66-2.53-2.67
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