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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 2.19. The lowest was -2.93. And the median was -2.60.
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 *||+||0.528 *||+||0.404 *||+||0.892 *||+||0.115 *|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 *||+||4.679 *||-||0.327 *|
|This Year (Mar15) TTM:||Last Year (May14) TTM:|
|Accounts Receivable was $870 Mil.|
Revenue was 1134.4 + 1222.9 + 1106 + 1182.9 = $4,646 Mil.
Gross Profit was 855.7 + 910 + 807.7 + 849.7 = $3,423 Mil.
Total Current Assets was $11,917 Mil.
Total Assets was $17,190 Mil.
Property, Plant and Equipment(Net PPE) was $1,301 Mil.
Depreciation, Depletion and Amortization(DDA) was $364 Mil.
Selling, General & Admin. Expense(SGA) was $1,805 Mil.
Total Current Liabilities was $909 Mil.
Long-Term Debt was $9,061 Mil.
Net Income was 177.1 + 156.6 + 165.5 + 176.5 = $676 Mil.
Non Operating Income was -22.6 + -19.1 + -10.5 + -10 = $-62 Mil.
Cash Flow from Operations was 91.5 + 354.2 + 255.7 + 254.1 = $956 Mil.
|Accounts Receivable was $0 Mil.
Revenue was 0 + 1161.5 + 1240.7 + 1074.3 = $3,477 Mil.
Gross Profit was 0 + 857.8 + 899.9 + 745.5 = $2,503 Mil.
Total Current Assets was $0 Mil.
Total Assets was $0 Mil.
Property, Plant and Equipment(Net PPE) was $0 Mil.
Depreciation, Depletion and Amortization(DDA) was $784 Mil.
Selling, General & Admin. Expense(SGA) was $1,360 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $0 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)|
|=||(869.8 / 4646.2)||/||(0 / 3476.5)|
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)|
|=||(910 / 3476.5)||/||(855.7 / 4646.2)|
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 - (11917.2 + 1300.7) / 17190.1)||/||(1 - (0 + 0) / 0)|
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))|
|=||(784.2 / (784.2 + 0))||/||(363.8 / (363.8 + 1300.7))|
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)|
|=||(1804.7 / 4646.2)||/||(1359.5 / 3476.5)|
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)|
|=||((9061.2 + 908.7) / 17190.1)||/||((0 + 0) / 0)|
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|
|=||(675.7 - -62.2||-||955.5)||/||17190.1|
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 signals that the company is likely to 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