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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 Weatherford International PLC was 4.03. The lowest was -3.44. And the median was -2.41.
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 Weatherford International PLC 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 * 1.1039||+||0.528 * 2.0567||+||0.404 * 1.2486||+||0.892 * 0.5829||+||0.115 * 0.9412|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2799||+||4.679 * -0.1952||-||0.327 * 1.0969|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $1,693 Mil.|
Revenue was 1585 + 2012 + 2237 + 2390 = $8,224 Mil.
Gross Profit was 111 + 78 + 368 + 374 = $931 Mil.
Total Current Assets was $5,366 Mil.
Total Assets was $14,516 Mil.
Property, Plant and Equipment(Net PPE) was $5,471 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,134 Mil.
Selling, General & Admin. Expense(SGA) was $1,469 Mil.
Total Current Liabilities was $3,478 Mil.
Long-Term Debt was $5,846 Mil.
Net Income was -498 + -1208 + -170 + -489 = $-2,365 Mil.
Non Operating Income was -30 + 3 + -14 + -34 = $-75 Mil.
Cash Flow from Operations was -205 + 323 + 134 + 291 = $543 Mil.
|Accounts Receivable was $2,631 Mil.
Revenue was 2794 + 3727 + 3877 + 3711 = $14,109 Mil.
Gross Profit was 592 + 819 + 992 + 882 = $3,285 Mil.
Total Current Assets was $7,592 Mil.
Total Assets was $18,223 Mil.
Property, Plant and Equipment(Net PPE) was $6,932 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,336 Mil.
Selling, General & Admin. Expense(SGA) was $1,969 Mil.
Total Current Liabilities was $4,393 Mil.
Long-Term Debt was $6,278 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)|
|=||(1693 / 8224)||/||(2631 / 14109)|
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)|
|=||(78 / 14109)||/||(111 / 8224)|
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 - (5366 + 5471) / 14516)||/||(1 - (7592 + 6932) / 18223)|
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))|
|=||(1336 / (1336 + 6932))||/||(1134 / (1134 + 5471))|
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)|
|=||(1469 / 8224)||/||(1969 / 14109)|
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)|
|=||((5846 + 3478) / 14516)||/||((6278 + 4393) / 18223)|
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|
|=||(-2365 - -75||-||543)||/||14516|
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.
Weatherford International PLC has a M-score of -3.10 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
Weatherford International PLC Annual Data
Weatherford International PLC Quarterly Data