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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 -2.42.
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 * 1.2129||+||0.528 * 2.5623||+||0.404 * 1.1378||+||0.892 * 0.5701||+||0.115 * 0.9293|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2598||+||4.679 * -0.3009||-||0.327 * 1.2782|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $1,414 Mil.|
Revenue was 1356 + 1402 + 1585 + 2012 = $6,355 Mil.
Gross Profit was 126 + 164 + 111 + 78 = $479 Mil.
Total Current Assets was $4,598 Mil.
Total Assets was $12,635 Mil.
Property, Plant and Equipment(Net PPE) was $4,708 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,016 Mil.
Selling, General & Admin. Expense(SGA) was $1,264 Mil.
Total Current Liabilities was $2,720 Mil.
Long-Term Debt was $6,937 Mil.
Net Income was -1780 + -565 + -498 + -1208 = $-4,051 Mil.
Non Operating Income was -10 + -85 + -30 + 3 = $-122 Mil.
Cash Flow from Operations was -106 + -139 + -205 + 323 = $-127 Mil.
|Accounts Receivable was $2,045 Mil.
Revenue was 2237 + 2390 + 2794 + 3727 = $11,148 Mil.
Gross Profit was 368 + 374 + 592 + 819 = $2,153 Mil.
Total Current Assets was $6,515 Mil.
Total Assets was $16,799 Mil.
Property, Plant and Equipment(Net PPE) was $6,394 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,263 Mil.
Selling, General & Admin. Expense(SGA) was $1,760 Mil.
Total Current Liabilities was $4,025 Mil.
Long-Term Debt was $6,020 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)|
|=||(1414 / 6355)||/||(2045 / 11148)|
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)|
|=||(2153 / 11148)||/||(479 / 6355)|
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 - (4598 + 4708) / 12635)||/||(1 - (6515 + 6394) / 16799)|
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))|
|=||(1263 / (1263 + 6394))||/||(1016 / (1016 + 4708))|
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)|
|=||(1264 / 6355)||/||(1760 / 11148)|
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)|
|=||((6937 + 2720) / 12635)||/||((6020 + 4025) / 16799)|
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|
|=||(-4051 - -122||-||-127)||/||12635|
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 -3.34 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