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GuruFocus has detected 5 Warning Signs with GlaxoSmithKline PLC $GSK.
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GlaxoSmithKline PLC (NYSE:GSK)
Beneish M-Score
-2.81 (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.

GlaxoSmithKline PLC has a M-score of -2.98 suggests that the company is not a manipulator.

GSK' s Beneish M-Score Range Over the Past 10 Years
Min: -3.78   Max: 1.07
Current: -2.81

-3.78
1.07

During the past 13 years, the highest Beneish M-Score of GlaxoSmithKline PLC was 1.07. The lowest was -3.78. And the median was -2.69.


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 GlaxoSmithKline PLC 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 * 0.9074+0.528 * 0.9559+0.404 * 1.0181+0.892 * 1.0251+0.115 * 1.2174
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8823+4.679 * -0.0976-0.327 * 1.0341
=-2.98

* 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 $7,964 Mil.
Revenue was 9116.04938272 + 9470.66167291 + 9910.64388962 + 9278.40909091 = $37,776 Mil.
Gross Profit was 6013.58024691 + 6339.57553059 + 6592.6412615 + 6261.36363636 = $25,207 Mil.
Total Current Assets was $20,725 Mil.
Total Assets was $73,130 Mil.
Property, Plant and Equipment(Net PPE) was $13,348 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,002 Mil.
Selling, General & Admin. Expense(SGA) was $12,512 Mil.
Total Current Liabilities was $23,157 Mil.
Long-Term Debt was $18,025 Mil.
Net Income was 1291.35802469 + 320.848938826 + 1061.760841 + -617.897727273 = $2,056 Mil.
Non Operating Income was 6.17283950617 + -39.950062422 + 7.88436268068 + -2.84090909091 = $-29 Mil.
Cash Flow from Operations was 1412.34567901 + 3734.082397 + 2321.94480946 + 1755.68181818 = $9,224 Mil.
Accounts Receivable was $8,563 Mil.
Revenue was 8873.21937322 + 9410.17964072 + 9397.2392638 + 9171.33956386 = $36,852 Mil.
Gross Profit was 5834.75783476 + 5606.28742515 + 6016.87116564 + 6048.28660436 = $23,506 Mil.
Total Current Assets was $22,548 Mil.
Total Assets was $77,605 Mil.
Property, Plant and Equipment(Net PPE) was $14,348 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,708 Mil.
Selling, General & Admin. Expense(SGA) was $13,834 Mil.
Total Current Liabilities was $19,828 Mil.
Long-Term Debt was $22,434 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)
=(7964.19753086 / 37775.7640362) / (8562.67806268 / 36851.9778416)
=0.21082823 / 0.23235328
=0.9074

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)
=(23506.2030299 / 36851.9778416) / (25207.1606754 / 37775.7640362)
=0.63785458 / 0.66728394
=0.9559

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 - (20724.691358 + 13348.1481481) / 73129.6296296) / (1 - (22548.4330484 + 14347.5783476) / 77605.4131054)
=0.53407614 / 0.5245691
=1.0181

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
=37775.7640362 / 36851.9778416
=1.0251

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))
=(2708.20069009 / (2708.20069009 + 14347.5783476)) / (2002.08317109 / (2002.08317109 + 13348.1481481))
=0.15878493 / 0.13042691
=1.2174

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)
=(12511.5745705 / 37775.7640362) / (13834.1034095 / 36851.9778416)
=0.33120639 / 0.3753965
=0.8823

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)
=((18024.691358 + 23156.7901235) / 73129.6296296) / ((22434.4729345 + 19827.6353276) / 77605.4131054)
=0.56312991 / 0.54457681
=1.0341

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
=(2056.07007724 - -28.733769326 - 9224.05470366) / 73129.6296296
=-0.0976

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.

GlaxoSmithKline PLC has a M-score of -2.98 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.

GlaxoSmithKline PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.23530.86921.10590.72370.93180.9960.98730.94851.06340.9756
GMI 1.01671.04390.99771.02611.00161.02831.03670.99041.08190.9452
AQI 1.03211.0251.17551.09350.9691.16480.93240.97391.22221.05
SGI 1.04920.96571.02370.96691.00670.96490.99060.90240.96741.0316
DEPI 1.00360.84530.98710.89371.0761.01691.08460.87651.00370.9746
SGAI 0.95981.04381.08111.32390.69671.06490.96191.1211.07650.87
LVGI 1.19231.14120.97931.04131.01351.03671.0081.03540.75031.0595
TATA -0.0837-0.0772-0.056-0.1206-0.03910.0039-0.0469-0.06090.0939-0.0993
M-score -2.65-3.03-2.56-3.36-2.67-2.44-2.71-2.96-1.81-2.95

GlaxoSmithKline PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.94851.04591.07781.16541.06341.01620.99731.01410.97560.9074
GMI 0.99041.01021.01731.03141.08191.0461.02721.00280.94520.9559
AQI 0.97391.06581.14391.21221.22221.10671.07061.02821.051.0181
SGI 0.90240.88970.90250.93380.96741.00441.01391.02241.03161.0251
DEPI 0.87651.0660.81680.70281.00370.7931.19881.09390.97461.2174
SGAI 1.1211.12981.14981.08031.07651.01760.91220.92140.870.8823
LVGI 1.03540.78480.76910.73160.75031.01861.08771.08781.05951.0341
TATA -0.06090.07850.08130.10350.0939-0.0393-0.0649-0.0864-0.0993-0.0976
M-score -2.96-2.08-2.02-1.76-1.81-2.61-2.72-2.84-2.95-2.98
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