Allscripts Healthcare Solutions Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Allscripts Healthcare Solutions 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 * 0.8892 | + | 0.528 * 0.993 | + | 0.404 * 0.8039 | + | 0.892 * 0.9204 | + | 0.115 * 0.977 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.057 | + | 4.679 * 0.297 | - | 0.327 * 0.7082 |
| = | -1.26 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Dec20) TTM: | Last Year (Dec19) TTM: |
Accounts Receivable was $347 Mil.
Revenue was 277.734 + 402.03 + 406.223 + 416.713 = $1,503 Mil.
Gross Profit was 82.653 + 161.597 + 164.484 + 156.961 = $566 Mil.
Total Current Assets was $1,153 Mil.
Total Assets was $2,918 Mil.
Property, Plant and Equipment(Net PPE) was $169 Mil.
Depreciation, Depletion and Amortization(DDA) was $213 Mil.
Selling, General, & Admin. Expense(SGA) was $390 Mil.
Total Current Liabilities was $935 Mil.
Long-Term Debt & Capital Lease Obligation was $261 Mil.
Net Income was 727.824 + 0.542 + -7.605 + -20.354 = $700 Mil.
Non Operating Income was -74.973 + -0.454 + 15.409 + 0.722 = $-59 Mil.
Cash Flow from Operations was -178.62 + 52.967 + 22.646 + -3.708 = $-107 Mil.
|
Accounts Receivable was $424 Mil.
Revenue was 311.918 + 444.184 + 444.46 + 432.049 = $1,633 Mil.
Gross Profit was 76.768 + 175.302 + 184.122 + 174.095 = $610 Mil.
Total Current Assets was $841 Mil.
Total Assets was $3,206 Mil.
Property, Plant and Equipment(Net PPE) was $184 Mil.
Depreciation, Depletion and Amortization(DDA) was $220 Mil.
Selling, General, & Admin. Expense(SGA) was $401 Mil.
Total Current Liabilities was $1,211 Mil.
Long-Term Debt & Capital Lease Obligation was $645 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Accounts Receivable 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) |
| = | (347.355 / 1502.7) | / | (424.415 / 1632.611) |
| = | 0.23115392 | / | 0.25996088 |
| | = | 0.8892 |
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) |
| = | (610.287 / 1632.611) | / | (565.695 / 1502.7) |
| = | 0.37381042 | / | 0.37645239 |
| | = | 0.993 |
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 Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (1153.222 + 168.763) / 2917.618) | / | (1 - (841.262 + 183.71) / 3205.739) |
| = | 0.54689579 | / | 0.68026967 |
| | = | 0.8039 |
4. SGI = Sales Growth Index
Ratio of Revenue 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 |
| = | 1502.7 | / | 1632.611 |
| | = | 0.9204 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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)) |
| = | (220.108 / (220.108 + 183.71)) | / | (212.989 / (212.989 + 168.763)) |
| = | 0.54506733 | / | 0.55792504 |
| | = | 0.977 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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) |
| = | (389.941 / 1502.7) | / | (400.808 / 1632.611) |
| = | 0.25949358 | / | 0.24550122 |
| | = | 1.057 |
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 in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((261.05 + 934.777) / 2917.618) | / | ((644.592 + 1210.69) / 3205.739) |
| = | 0.40986414 | / | 0.5787377 |
| | = | 0.7082 |
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 |
| = | (700.407 - -59.296 | - | -106.715) | / | 2917.618 |
| | = | 0.297 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Allscripts Healthcare Solutions has a M-score of -1.26 signals that the company is likely to be a manipulator.
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