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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.
Zimmer Holdings Inc has a M-score of -2.54 suggests that the company is not a manipulator.
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.
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|
|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
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)|
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)|
|=||(849.7 / 4563.2)||/||(807.7 / 4691.1)|
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 - (4332.7 + 1279) / 9670.9)||/||(1 - (3837.2 + 1234.1) / 9357.4)|
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))|
|=||(358.6 / (358.6 + 1234.1))||/||(373.3 / (373.3 + 1279))|
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)|
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)|
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|
|=||(799.4 - -20.5||-||998.8)||/||9670.9|
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.
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