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Zimmer Holdings Inc (NYSE:ZMH)
Beneish M-Score
-2.63 (As of Today)

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.

Zimmer Holdings Inc has a M-score of -2.63 suggests that the company is not a manipulator.

ZMH' s 10-Year Beneish M-Score Range
Min: -2.86   Max: 0.91
Current: -2.63

-2.86
0.91

During the past 13 years, the highest Beneish M-Score of Zimmer Holdings Inc was 0.91. The lowest was -2.86. And the median was -2.57.


Definition

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 * 0.9634+0.528 * 0.9853+0.404 * 0.9702+0.892 * 1.0108+0.115 * 1.003
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.97+4.679 * -0.0304-0.327 * 0.906
=-2.63

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $912 Mil.
Revenue was 1222.9 + 1106 + 1182.9 + 1161.5 = $4,673 Mil.
Gross Profit was 910 + 807.7 + 849.7 + 856.1 = $3,424 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 $376 Mil.
Selling, General & Admin. Expense(SGA) was $1,844 Mil.
Total Current Liabilities was $1,038 Mil.
Long-Term Debt was $1,426 Mil.
Net Income was 156.6 + 165.5 + 176.5 + 221.5 = $720 Mil.
Non Operating Income was -19.1 + -10.5 + -10 + 0 = $-40 Mil.
Cash Flow from Operations was 354.2 + 255.7 + 254.1 + 188.8 = $1,053 Mil.
Accounts Receivable was $937 Mil.
Revenue was 1240.7 + 1074.3 + 1169.5 + 1138.9 = $4,623 Mil.
Gross Profit was 899.9 + 745.5 + 845.9 + 846 = $3,337 Mil.
Total Current Assets was $4,198 Mil.
Total Assets was $9,581 Mil.
Property, Plant and Equipment(Net PPE) was $1,225 Mil.
Depreciation, Depletion and Amortization(DDA) was $359 Mil.
Selling, General & Admin. Expense(SGA) was $1,881 Mil.
Total Current Liabilities was $1,032 Mil.
Long-Term Debt was $1,672 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(912.1 / 4673.3) / (936.6 / 4623.4)
=0.19517258 / 0.20257819
=0.9634

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(807.7 / 4623.4) / (910 / 4673.3)
=0.72182809 / 0.73256585
=0.9853

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

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 - (4197.7 + 1224.7) / 9580.6)
=0.42107175 / 0.43402292
=0.9702

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=4673.3 / 4623.4
=1.0108

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))
=(358.5 / (358.5 + 1224.7)) / (375.8 / (375.8 + 1288.8))
=0.22644012 / 0.22575994
=1.003

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)
=(1844 / 4673.3) / (1880.8 / 4623.4)
=0.39458199 / 0.40680019
=0.97

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) / ((1672.3 + 1031.6) / 9580.6)
=0.25569037 / 0.28222658
=0.906

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(720.1 - -39.6 - 1052.8) / 9634.7
=-0.0304

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 -2.63 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Zimmer Holdings Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.90611.12180.96681.02781.03181.00211.02481.04991.0240.9634
GMI 0.95270.99761.0021.02280.99990.99731.01630.99951.03680.9853
AQI 0.97590.95320.94220.9720.9370.96061.00290.95930.95570.9702
SGI 1.10241.06371.1151.05740.99381.03051.05491.00451.03391.0108
DEPI 1.07841.05641.02691.07070.82590.98850.95330.99541.01891.003
SGAI 0.96021.01180.98551.12561.00121.0091.02960.91060.99830.97
LVGI 0.51721.01241.05541.32281.37320.98731.24431.00040.98330.906
TATA -0.023-0.0351-0.0214-0.0262-0.0514-0.0746-0.0489-0.044-0.0211-0.0304
M-score -2.44-2.50-2.54-2.64-2.86-2.82-2.72-2.64-2.52-2.63

Zimmer Holdings Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.04751.04991.02111.0281.00391.0240.99010.97681.02540.9634
GMI 1.00810.99950.99981.00981.02661.03681.03731.02970.99960.9853
AQI 0.94560.95930.97731.02341.01430.95570.94070.91140.91640.9702
SGI 1.00891.00450.99841.01121.02351.03391.03941.03211.0281.0108
DEPI 0.96180.99541.05981.08991.05031.01890.96190.9780.99661.003
SGAI 1.00830.91060.91250.95870.95810.99830.99630.96140.9640.97
LVGI 1.04761.00040.99660.97970.9390.98330.98240.99990.97890.906
TATA -0.0476-0.044-0.0413-0.0419-0.0377-0.0211-0.0221-0.0246-0.0185-0.0304
M-score -2.69-2.64-2.64-2.60-2.58-2.52-2.56-2.60-2.54-2.63
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