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GuruFocus has detected 10 Warning Signs with Baxter International Inc $BAX.
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Baxter International Inc (NYSE:BAX)
Beneish M-Score
-2.95 (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.

Baxter International Inc has a M-score of -2.95 suggests that the company is not a manipulator.

BAX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.04   Max: -0.36
Current: -2.95

-3.04
-0.36

During the past 13 years, the highest Beneish M-Score of Baxter International Inc was -0.36. The lowest was -3.04. And the median was -2.63.


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 Baxter International 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 * 0.8711+0.528 * 1.0091+0.404 * 1.068+0.892 * 1.0325+0.115 * 0.9298
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8756+4.679 * -0.0922-0.327 * 0.9822
=-2.95

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $1,646 Mil.
Revenue was 2475 + 2645 + 2558 + 2585 = $10,263 Mil.
Gross Profit was 1042 + 1102 + 1071 + 972 = $4,187 Mil.
Total Current Assets was $6,633 Mil.
Total Assets was $15,659 Mil.
Property, Plant and Equipment(Net PPE) was $4,274 Mil.
Depreciation, Depletion and Amortization(DDA) was $805 Mil.
Selling, General & Admin. Expense(SGA) was $2,668 Mil.
Total Current Liabilities was $2,438 Mil.
Long-Term Debt was $2,784 Mil.
Net Income was 272 + 243 + 130 + 1212 = $1,857 Mil.
Non Operating Income was -2 + 10 + -44 + 1161 = $1,125 Mil.
Cash Flow from Operations was 189 + 713 + 499 + 775 = $2,176 Mil.
Accounts Receivable was $1,830 Mil.
Revenue was 2375 + 2603 + 2487 + 2475 = $9,940 Mil.
Gross Profit was 965 + 1072 + 1034 + 1021 = $4,092 Mil.
Total Current Assets was $8,017 Mil.
Total Assets was $17,350 Mil.
Property, Plant and Equipment(Net PPE) was $4,403 Mil.
Depreciation, Depletion and Amortization(DDA) was $761 Mil.
Selling, General & Admin. Expense(SGA) was $2,951 Mil.
Total Current Liabilities was $3,823 Mil.
Long-Term Debt was $2,068 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)
=(1646 / 10263) / (1830 / 9940)
=0.16038195 / 0.18410463
=0.8711

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)
=(4092 / 9940) / (4187 / 10263)
=0.41167002 / 0.40797038
=1.0091

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 - (6633 + 4274) / 15659) / (1 - (8017 + 4403) / 17350)
=0.30346765 / 0.28414986
=1.068

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
=10263 / 9940
=1.0325

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))
=(761 / (761 + 4403)) / (805 / (805 + 4274))
=0.14736638 / 0.15849577
=0.9298

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)
=(2668 / 10263) / (2951 / 9940)
=0.25996297 / 0.29688129
=0.8756

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)
=((2784 + 2438) / 15659) / ((2068 + 3823) / 17350)
=0.33348234 / 0.3395389
=0.9822

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
=(1857 - 1125 - 2176) / 15659
=-0.0922

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.

Baxter International Inc has a M-score of -2.95 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 local exchange's currency.

Baxter International Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01570.89141.14280.96240.98770.9991.77720.59791.1670.8901
GMI 0.93150.98710.95571.11970.91470.99071.15781.03461.02751.0285
AQI 0.89551.11370.95491.07221.05930.9611.15611.54760.51641.321
SGI 1.08531.09631.01731.02241.08181.00310.67541.13870.92991.0196
DEPI 1.04410.9521.09420.95521.06541.03441.39410.49491.02730.9384
SGAI 1.01790.97620.9951.04121.0031.03771.39080.94391.00370.8683
LVGI 1.00671.07271.00281.05511.04811.00681.04560.96460.90220.77
TATA -0.037-0.0308-0.038-0.0814-0.0267-0.0459-0.0473-0.0267-0.0433-0.0634
M-score -2.64-2.62-2.54-2.81-2.57-2.72-2.17-2.65-2.74-2.62

Baxter International Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.48390.79570.98850.58211.46980.85390.65630.98460.89010.8711
GMI 0.96350.98990.99280.93561.11491.08571.06371.04591.02851.0091
AQI 1.54760.85220.70010.79520.51641.06471.38471.32691.3211.068
SGI 1.4071.20610.99011.07120.73840.82460.96860.99681.01961.0325
DEPI 0.49490.98861.20690.46491.02730.5460.46321.02870.93840.9298
SGAI 0.82090.89090.97550.93351.16881.03470.91280.87490.86830.8756
LVGI 0.96461.06181.17710.90110.90220.61370.59480.7110.770.9822
TATA -0.0264-0.0167-0.0255-0.0232-0.0433-0.0353-0.0576-0.0686-0.0634-0.0922
M-score -2.53-2.63-2.77-3.04-2.61-2.80-2.82-2.54-2.62-2.95
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