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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 -2.97. 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 * 0.921||+||0.528 * 0.8385||+||0.404 * 1.0213||+||0.892 * 0.9769||+||0.115 * 0.9555|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0111||+||4.679 * -0.068||-||0.327 * 0.9826|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $3,015 Mil.|
Revenue was 3727 + 3877 + 3711 + 3596 = $14,911 Mil.
Gross Profit was 819 + 992 + 882 + 757 = $3,450 Mil.
Total Current Assets was $7,944 Mil.
Total Assets was $18,889 Mil.
Property, Plant and Equipment(Net PPE) was $7,123 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,371 Mil.
Selling, General & Admin. Expense(SGA) was $2,017 Mil.
Total Current Liabilities was $4,027 Mil.
Long-Term Debt was $6,798 Mil.
Net Income was -475 + 77 + -145 + -41 = $-584 Mil.
Non Operating Income was -225 + -9 + -19 + -9 = $-262 Mil.
Cash Flow from Operations was 584 + 350 + 435 + -406 = $963 Mil.
|Accounts Receivable was $3,351 Mil.
Revenue was 3738 + 3820 + 3868 + 3837 = $15,263 Mil.
Gross Profit was 604 + 784 + 742 + 831 = $2,961 Mil.
Total Current Assets was $9,934 Mil.
Total Assets was $21,977 Mil.
Property, Plant and Equipment(Net PPE) was $7,689 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,402 Mil.
Selling, General & Admin. Expense(SGA) was $2,042 Mil.
Total Current Liabilities was $5,757 Mil.
Long-Term Debt was $7,061 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)|
|=||(3015 / 14911)||/||(3351 / 15263)|
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)|
|=||(992 / 15263)||/||(819 / 14911)|
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 - (7944 + 7123) / 18889)||/||(1 - (9934 + 7689) / 21977)|
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))|
|=||(1402 / (1402 + 7689))||/||(1371 / (1371 + 7123))|
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)|
|=||(2017 / 14911)||/||(2042 / 15263)|
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)|
|=||((6798 + 4027) / 18889)||/||((7061 + 5757) / 21977)|
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|
|=||(-584 - -262||-||963)||/||18889|
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 -2.97 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