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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 Valeant Pharmaceuticals International Inc was 0.77. The lowest was -3.40. And the median was -2.30.
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 * 1.0168||+||0.528 * 0.9667||+||0.404 * 1.082||+||0.892 * 1.273||+||0.115 * 0.8824|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0466||+||4.679 * -0.0484||-||0.327 * 1.0656|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $2,687 Mil.|
Revenue was 2736.4 + 2786.8 + 2732.4 + 2190.9 = $10,447 Mil.
Gross Profit was 2059.7 + 2138.6 + 2047.3 + 1616.2 = $7,862 Mil.
Total Current Assets was $5,507 Mil.
Total Assets was $48,965 Mil.
Property, Plant and Equipment(Net PPE) was $1,442 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,628 Mil.
Selling, General & Admin. Expense(SGA) was $2,700 Mil.
Total Current Liabilities was $5,313 Mil.
Long-Term Debt was $30,265 Mil.
Net Income was -361.9 + 49.5 + -53 + 73.7 = $-292 Mil.
Non Operating Income was -3.3 + -34 + 5.6 + -91.1 = $-123 Mil.
Cash Flow from Operations was 562.4 + 736.5 + 410.5 + 491.1 = $2,201 Mil.
|Accounts Receivable was $2,076 Mil.
Revenue was 2222.5 + 2056.2 + 2041.1 + 1886.2 = $8,206 Mil.
Gross Profit was 1651.2 + 1495.4 + 1455.5 + 1367.8 = $5,970 Mil.
Total Current Assets was $4,132 Mil.
Total Assets was $26,305 Mil.
Property, Plant and Equipment(Net PPE) was $1,312 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,738 Mil.
Selling, General & Admin. Expense(SGA) was $2,026 Mil.
Total Current Liabilities was $2,708 Mil.
Long-Term Debt was $15,228 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)|
|=||(2686.9 / 10446.5)||/||(2075.8 / 8206)|
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)|
|=||(2138.6 / 8206)||/||(2059.7 / 10446.5)|
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 - (5507.2 + 1441.8) / 48964.5)||/||(1 - (4131.7 + 1312.3) / 26304.7)|
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))|
|=||(1737.6 / (1737.6 + 1312.3))||/||(2627.5 / (2627.5 + 1441.8))|
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)|
|=||(2699.8 / 10446.5)||/||(2026.3 / 8206)|
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)|
|=||((30265.4 + 5312.6) / 48964.5)||/||((15228 + 2708.4) / 26304.7)|
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|
|=||(-291.7 - -122.8||-||2200.5)||/||48964.5|
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 -2.47 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
Valeant Pharmaceuticals International Inc Annual Data
Valeant Pharmaceuticals International Inc Quarterly Data