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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 Willis Group Holdings PLC was -2.19. The lowest was -3.34. 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 Willis Group Holdings 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 * 1.0632||+||0.528 * 1||+||0.404 * 1.0823||+||0.892 * 1.0133||+||0.115 * 1.0061|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9934||+||4.679 * 0.0067||-||0.327 * 0.9926|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $1,100 Mil.|
Revenue was 846 + 922 + 1087 + 958 = $3,813 Mil.
Gross Profit was 846 + 922 + 1087 + 958 = $3,813 Mil.
Total Current Assets was $12,334 Mil.
Total Assets was $17,813 Mil.
Property, Plant and Equipment(Net PPE) was $531 Mil.
Depreciation, Depletion and Amortization(DDA) was $161 Mil.
Selling, General & Admin. Expense(SGA) was $2,298 Mil.
Total Current Liabilities was $11,881 Mil.
Long-Term Debt was $2,248 Mil.
Net Income was 117 + 70 + 210 + 76 = $473 Mil.
Non Operating Income was 9 + 23 + -6 + 18 = $44 Mil.
Cash Flow from Operations was 106 + 71 + -64 + 196 = $309 Mil.
|Accounts Receivable was $1,021 Mil.
Revenue was 812 + 935 + 1097 + 919 = $3,763 Mil.
Gross Profit was 812 + 935 + 1097 + 919 = $3,763 Mil.
Total Current Assets was $10,824 Mil.
Total Assets was $15,208 Mil.
Property, Plant and Equipment(Net PPE) was $481 Mil.
Depreciation, Depletion and Amortization(DDA) was $147 Mil.
Selling, General & Admin. Expense(SGA) was $2,283 Mil.
Total Current Liabilities was $10,005 Mil.
Long-Term Debt was $2,148 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)|
|=||(1100 / 3813)||/||(1021 / 3763)|
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)|
|=||(922 / 3763)||/||(846 / 3813)|
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 - (12334 + 531) / 17813)||/||(1 - (10824 + 481) / 15208)|
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))|
|=||(147 / (147 + 481))||/||(161 / (161 + 531))|
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)|
|=||(2298 / 3813)||/||(2283 / 3763)|
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)|
|=||((2248 + 11881) / 17813)||/||((2148 + 10005) / 15208)|
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|
|=||(473 - 44||-||309)||/||17813|
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.
Willis Group Holdings PLC has a M-score of -2.34 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
Willis Group Holdings PLC Annual Data
Willis Group Holdings PLC Quarterly Data