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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.
Weatherford International Ltd has a M-score of -2.84 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Weatherford International Ltd was 4.03. The lowest was -2.84. 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 Ltd 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 * 0.9222||+||0.528 * 1.1383||+||0.404 * 0.9173||+||0.892 * 1.0032||+||0.115 * 0.9324|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0503||+||4.679 * -0.0636||-||0.327 * 1.0373|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $3,594 Mil.|
Revenue was 3738 + 3820 + 3868 + 3837 = $15,263 Mil.
Gross Profit was 604 + 784 + 742 + 831 = $2,961 Mil.
Total Current Assets was $8,774 Mil.
Total Assets was $21,977 Mil.
Property, Plant and Equipment(Net PPE) was $8,368 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,402 Mil.
Selling, General & Admin. Expense(SGA) was $2,044 Mil.
Total Current Liabilities was $5,699 Mil.
Long-Term Debt was $7,061 Mil.
Net Income was -271 + 22 + -118 + 22 = $-345 Mil.
Non Operating Income was -16 + -30 + -18 + -113 = $-177 Mil.
Cash Flow from Operations was 662 + 326 + 252 + -11 = $1,229 Mil.
|Accounts Receivable was $3,885 Mil.
Revenue was 4058 + 3819 + 3747 + 3591 = $15,215 Mil.
Gross Profit was 841 + 852 + 776 + 891 = $3,360 Mil.
Total Current Assets was $9,029 Mil.
Total Assets was $22,795 Mil.
Property, Plant and Equipment(Net PPE) was $8,299 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,282 Mil.
Selling, General & Admin. Expense(SGA) was $1,940 Mil.
Total Current Liabilities was $5,710 Mil.
Long-Term Debt was $7,049 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)|
|=||(3594 / 15263)||/||(3885 / 15215)|
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)|
|=||(784 / 15215)||/||(604 / 15263)|
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 - (8774 + 8368) / 21977)||/||(1 - (9029 + 8299) / 22795)|
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))|
|=||(1282 / (1282 + 8299))||/||(1402 / (1402 + 8368))|
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)|
|=||(2044 / 15263)||/||(1940 / 15215)|
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)|
|=||((7061 + 5699) / 21977)||/||((7049 + 5710) / 22795)|
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|
|=||(-345 - -177||-||1229)||/||21977|
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 Ltd has a M-score of -2.84 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 Ltd Annual Data
Weatherford International Ltd Quarterly Data