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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.
Valeant Pharmaceuticals International Inc has a M-score of -2.16 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 2.53. The lowest was -3.69. And the median was -2.36.
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 Valeant Pharmaceuticals International 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 * 0.9073||+||0.528 * 1.0927||+||0.404 * 0.9725||+||0.892 * 1.7839||+||0.115 * 1.1265|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0565||+||4.679 * -0.0705||-||0.327 * 1.0285|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $1,706 Mil.|
Revenue was 1886.2 + 2063.757 + 1541.731 + 1095.762 = $6,587 Mil.
Gross Profit was 1367.8 + 1331.82 + 966.523 + 798.12 = $4,464 Mil.
Total Current Assets was $3,950 Mil.
Total Assets was $27,989 Mil.
Property, Plant and Equipment(Net PPE) was $1,215 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,075 Mil.
Selling, General & Admin. Expense(SGA) was $1,541 Mil.
Total Current Liabilities was $2,563 Mil.
Long-Term Debt was $17,148 Mil.
Net Income was -22.6 + 123.765 + -973.243 + 10.866 = $-861 Mil.
Non Operating Income was -107.1 + -41.375 + -3.082 + -6.119 = $-158 Mil.
Cash Flow from Operations was 484.3 + 279.868 + 201.712 + 305.028 = $1,271 Mil.
|Accounts Receivable was $1,054 Mil.
Revenue was 1068.4 + 920.043 + 884.14 + 820.09 = $3,693 Mil.
Gross Profit was 768.1 + 702.202 + 653.888 + 610.323 = $2,735 Mil.
Total Current Assets was $2,370 Mil.
Total Assets was $17,486 Mil.
Property, Plant and Equipment(Net PPE) was $453 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,112 Mil.
Selling, General & Admin. Expense(SGA) was $818 Mil.
Total Current Liabilities was $1,646 Mil.
Long-Term Debt was $10,327 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)|
|=||(1706.2 / 6587.45)||/||(1054.161 / 3692.673)|
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)|
|=||(1331.82 / 3692.673)||/||(1367.8 / 6587.45)|
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 - (3950.1 + 1215) / 27989)||/||(1 - (2370.129 + 452.969) / 17486.467)|
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))|
|=||(1112.04 / (1112.04 + 452.969))||/||(2075.461 / (2075.461 + 1215))|
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)|
|=||(1540.817 / 6587.45)||/||(817.542 / 3692.673)|
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)|
|=||((17148 + 2563) / 27989)||/||((10327.444 + 1646.128) / 17486.467)|
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|
|=||(-861.212 - -157.676||-||1270.908)||/||27989|
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.
Valeant Pharmaceuticals International Inc has a M-score of -2.16 signals that the company is likely to 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
Valeant Pharmaceuticals International Inc Annual Data
Valeant Pharmaceuticals International Inc Quarterly Data