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Zimmer Holdings Inc (NYSE:ZMH)
Beneish M-Score
-2.54 (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 -2.54 suggests that the company is not a manipulator.

ZMH' s 10-Year Beneish M-Score Range
Min: -2.97   Max: 2.19
Current: -2.54

-2.97
2.19

During the past 13 years, the highest Beneish M-Score of Zimmer Holdings Inc was 2.19. The lowest was -2.97. And the median was -2.58.


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 * 1.0254+0.528 * 0.9996+0.404 * 0.9164+0.892 * 1.028+0.115 * 0.9966
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.964+4.679 * -0.0185-0.327 * 0.9789
=-2.54

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $948 Mil.
Revenue was 1106 + 1182.9 + 1161.5 + 1240.7 = $4,691 Mil.
Gross Profit was 807.7 + 849.7 + 856.1 + 899.9 = $3,413 Mil.
Total Current Assets was $4,333 Mil.
Total Assets was $9,671 Mil.
Property, Plant and Equipment(Net PPE) was $1,279 Mil.
Depreciation, Depletion and Amortization(DDA) was $373 Mil.
Selling, General & Admin. Expense(SGA) was $1,862 Mil.
Total Current Liabilities was $1,093 Mil.
Long-Term Debt was $1,426 Mil.
Net Income was 165.5 + 176.5 + 221.5 + 235.9 = $799 Mil.
Non Operating Income was -10.5 + -10 + 0 + 0 = $-21 Mil.
Cash Flow from Operations was 255.7 + 254.1 + 188.8 + 300.2 = $999 Mil.
Accounts Receivable was $899 Mil.
Revenue was 1074.3 + 1169.5 + 1138.9 + 1180.5 = $4,563 Mil.
Gross Profit was 745.5 + 845.9 + 846 + 881.6 = $3,319 Mil.
Total Current Assets was $3,837 Mil.
Total Assets was $9,357 Mil.
Property, Plant and Equipment(Net PPE) was $1,234 Mil.
Depreciation, Depletion and Amortization(DDA) was $359 Mil.
Selling, General & Admin. Expense(SGA) was $1,879 Mil.
Total Current Liabilities was $804 Mil.
Long-Term Debt was $1,686 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)
=(947.6 / 4691.1) / (898.9 / 4563.2)
=0.20199953 / 0.19698896
=1.0254

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)
=(849.7 / 4563.2) / (807.7 / 4691.1)
=0.72734046 / 0.72763318
=0.9996

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 - (4332.7 + 1279) / 9670.9) / (1 - (3837.2 + 1234.1) / 9357.4)
=0.41973343 / 0.4580439
=0.9164

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
=4691.1 / 4563.2
=1.028

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))
=(358.6 / (358.6 + 1234.1)) / (373.3 / (373.3 + 1279))
=0.22515226 / 0.2259275
=0.9966

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)
=(1862.4 / 4691.1) / (1879.3 / 4563.2)
=0.3970071 / 0.41183818
=0.964

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)
=((1426.4 + 1093) / 9670.9) / ((1686 + 804.2) / 9357.4)
=0.2605135 / 0.26612093
=0.9789

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
=(799.4 - -20.5 - 998.8) / 9670.9
=-0.0185

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 -2.54 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.68810.90611.12180.96681.02781.03181.00211.02481.04991.024
GMI 0.98660.95270.99761.0021.02280.99990.99731.01620.99951.0368
AQI 0.96410.97590.95320.94220.9720.9370.96061.00290.95930.9557
SGI 1.56811.10241.06371.1151.05740.99381.03051.05491.00451.0339
DEPI 0.73411.07841.05641.02691.07070.82590.98850.95330.99541.0189
SGAI 1.0290.96021.01180.98551.12450.9841.02661.03050.91070.9983
LVGI 0.72560.51721.01241.05541.32281.37320.98731.24431.00040.9833
TATA -0.0507-0.023-0.0351-0.0214-0.0262-0.0514-0.0746-0.0489-0.044-0.0211
M-score -2.46-2.44-2.50-2.54-2.64-2.86-2.82-2.72-2.64-2.52

Zimmer Holdings Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.9951.04751.04991.02111.0281.00391.0240.99010.97681.0254
GMI 1.01141.0080.99950.99981.00981.02661.03681.03731.02970.9996
AQI 0.96550.94560.95930.97731.02341.01430.95570.94070.91140.9164
SGI 1.02571.00891.00450.99841.01121.02351.03391.03941.03211.028
DEPI 0.9240.96180.99541.05981.08991.05031.01890.96190.9780.9966
SGAI 1.01681.00860.91070.91260.95870.95820.99830.99630.96140.964
LVGI 1.26311.04761.00040.99660.97970.9390.98330.98240.99990.9789
TATA -0.0525-0.055-0.044-0.0413-0.0419-0.0377-0.0211-0.0221-0.0246-0.0185
M-score -2.81-2.72-2.64-2.64-2.60-2.58-2.52-2.56-2.60-2.54
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