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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 Zimmer Holdings Inc was 0.91. The lowest was -2.89. And the median was -2.61.
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 Zimmer Holdings Inc 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 * 1.2849||+||0.528 * 0.9855||+||0.404 * 0.9639||+||0.892 * 0.7559||+||0.115 * 0.6188|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9687||+||4.679 * -0.0887||-||0.327 * 0.9229|
|This Year (Dec14) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $912 Mil.|
Revenue was 1222.9 + 1106 + 1182.9 + 0 = $3,512 Mil.
Gross Profit was 910 + 807.7 + 849.7 + 0 = $2,567 Mil.
Total Current Assets was $4,289 Mil.
Total Assets was $9,635 Mil.
Property, Plant and Equipment(Net PPE) was $1,289 Mil.
Depreciation, Depletion and Amortization(DDA) was $776 Mil.
Selling, General & Admin. Expense(SGA) was $1,380 Mil.
Total Current Liabilities was $1,038 Mil.
Long-Term Debt was $1,426 Mil.
Net Income was 156.6 + 165.5 + 176.5 + 0 = $499 Mil.
Non Operating Income was -19.1 + -10.5 + -10 + 0 = $-40 Mil.
Cash Flow from Operations was 354.2 + 255.7 + 254.1 + 529 = $1,393 Mil.
|Accounts Receivable was $939 Mil.
Revenue was 1161.5 + 1240.7 + 1074.3 + 1169.5 = $4,646 Mil.
Gross Profit was 856.1 + 899.9 + 745.5 + 845.9 = $3,347 Mil.
Total Current Assets was $4,047 Mil.
Total Assets was $9,380 Mil.
Property, Plant and Equipment(Net PPE) was $1,236 Mil.
Depreciation, Depletion and Amortization(DDA) was $374 Mil.
Selling, General & Admin. Expense(SGA) was $1,884 Mil.
Total Current Liabilities was $919 Mil.
Long-Term Debt was $1,680 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)|
|=||(912.1 / 3511.8)||/||(939.1 / 4646)|
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)|
|=||(807.7 / 4646)||/||(910 / 3511.8)|
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 - (4289 + 1288.8) / 9634.7)||/||(1 - (4046.7 + 1235.6) / 9380.1)|
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))|
|=||(374.4 / (374.4 + 1235.6))||/||(776 / (776 + 1288.8))|
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)|
|=||(1379.7 / 3511.8)||/||(1884.3 / 4646)|
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)|
|=||((1425.5 + 1038) / 9634.7)||/||((1680.1 + 918.7) / 9380.1)|
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|
|=||(498.6 - -39.6||-||1393)||/||9634.7|
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.
Zimmer Holdings Inc has a M-score of -2.89 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
Zimmer Holdings Inc Annual Data
Zimmer Holdings Inc Quarterly Data