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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 -3.33. 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 * 0.7524||+||0.528 * 0.8254||+||0.404 * 0.9315||+||0.892 * 0.9392||+||0.115 * 0.9051|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0282||+||4.679 * -0.0932||-||0.327 * 0.9943|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|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.
Net Income was -118 + -475 + 77 + -145 = $-661 Mil.
Non Operating Income was -37 + -225 + -9 + -19 = $-290 Mil.
Cash Flow from Operations was -42 + 584 + 350 + 435 = $1,327 Mil.
|Accounts Receivable was $3,723 Mil.
Revenue was 3596 + 3738 + 3820 + 3868 = $15,022 Mil.
Gross Profit was 757 + 604 + 784 + 742 = $2,887 Mil.
Total Current Assets was $8,860 Mil.
Total Assets was $21,830 Mil.
Property, Plant and Equipment(Net PPE) was $8,213 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,407 Mil.
Selling, General & Admin. Expense(SGA) was $2,039 Mil.
Total Current Liabilities was $5,817 Mil.
Long-Term Debt was $7,039 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)|
|=||(2631 / 14109)||/||(3723 / 15022)|
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)|
|=||(819 / 15022)||/||(592 / 14109)|
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 - (7592 + 6932) / 18223)||/||(1 - (8860 + 8213) / 21830)|
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))|
|=||(1407 / (1407 + 8213))||/||(1336 / (1336 + 6932))|
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)|
|=||(1969 / 14109)||/||(2039 / 15022)|
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)|
|=||((6278 + 4393) / 18223)||/||((7039 + 5817) / 21830)|
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|
|=||(-661 - -290||-||1327)||/||18223|
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 -3.33 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