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Zimmer Holdings Inc (NYSE:ZMH)
Beneish M-Score
-2.52 (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 -2.52 suggests that the company is not a manipulator.

ZMH' s 10-Year Beneish M-Score Range
Min: -2.86   Max: 0.91
Current: -2.52

-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 * 1.024+0.528 * 1.0368+0.404 * 0.9557+0.892 * 1.0339+0.115 * 1.0189
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9983+4.679 * -0.0211-0.327 * 0.9833
=-2.52

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
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.
Net Income was 235.9 + 154.4 + 152.1 + 218.6 = $761 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 300.2 + 292.7 + 189.7 + 180.5 = $963 Mil.
Accounts Receivable was $885 Mil.
Revenue was 1180.5 + 1025.5 + 1125 + 1140.7 = $4,472 Mil.
Gross Profit was 881.6 + 769.8 + 843.1 + 852 = $3,347 Mil.
Total Current Assets was $3,709 Mil.
Total Assets was $9,012 Mil.
Property, Plant and Equipment(Net PPE) was $1,211 Mil.
Depreciation, Depletion and Amortization(DDA) was $363 Mil.
Selling, General & Admin. Expense(SGA) was $1,822 Mil.
Total Current Liabilities was $866 Mil.
Long-Term Debt was $1,721 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)
=(936.6 / 4623.4) / (884.6 / 4471.7)
=0.20257819 / 0.19782186
=1.024

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)
=(745.5 / 4471.7) / (899.9 / 4623.4)
=0.7483731 / 0.72182809
=1.0368

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 - (4197.7 + 1224.7) / 9580.6) / (1 - (3708.7 + 1210.7) / 9012.4)
=0.43402292 / 0.45415206
=0.9557

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
=4623.4 / 4471.7
=1.0339

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))
=(363.1 / (363.1 + 1210.7)) / (358.5 / (358.5 + 1224.7))
=0.23071547 / 0.22644012
=1.0189

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)
=(1880.8 / 4623.4) / (1822.1 / 4471.7)
=0.40680019 / 0.40747367
=0.9983

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)
=((1672.3 + 1031.6) / 9580.6) / ((1720.8 + 866) / 9012.4)
=0.28222658 / 0.28702676
=0.9833

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
=(761 - 0 - 963.1) / 9580.6
=-0.0211

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 -2.52 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 0.98660.95270.99761.0021.02280.99990.99731.01630.99951.0368
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 1.0290.96021.01180.98551.12561.00121.0091.02960.91060.9983
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

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.03651.02480.97480.9951.04751.04991.02111.0281.00391.024
GMI 1.00771.01631.0181.01151.00810.99950.99981.00981.02661.0368
AQI 1.00081.00290.99710.96550.94560.95930.97731.02341.01430.9557
SGI 1.0541.05491.04771.02571.00891.00450.99841.01121.02351.0339
DEPI 0.97910.95330.92330.9240.96180.99541.05981.08991.05031.0189
SGAI 0.97531.02961.0331.01631.00830.91060.91250.95870.95810.9983
LVGI 1.17861.24431.23931.26311.04761.00040.99660.97970.9390.9833
TATA -0.0698-0.0489-0.0512-0.0476-0.0476-0.044-0.0413-0.0419-0.0377-0.0211
M-score -2.78-2.72-2.78-2.79-2.69-2.64-2.64-2.60-2.58-2.52
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