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GuruFocus has detected 6 Warning Signs with Royal Dutch Shell PLC $RDS.A.
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Royal Dutch Shell PLC (NYSE:RDS.A)
Beneish M-Score
-2.73 (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.

Royal Dutch Shell PLC has a M-score of -2.89 suggests that the company is not a manipulator.

RDS.A' s Beneish M-Score Range Over the Past 10 Years
Min: -3.17   Max: -1.53
Current: -2.73

-3.17
-1.53

During the past 13 years, the highest Beneish M-Score of Royal Dutch Shell PLC was -1.53. The lowest was -3.17. And the median was -2.73.


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 Royal Dutch Shell 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 * 0.803+0.528 * 0.8438+0.404 * 1.0336+0.892 * 1.0418+0.115 * 1.009
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8999+4.679 * -0.0433-0.327 * 1.0286
=-2.89

* 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 $44,201 Mil.
Revenue was 73311 + 67092 + 62938 + 60271 = $263,612 Mil.
Gross Profit was 15387 + 14861 + 12650 + 11833 = $54,731 Mil.
Total Current Assets was $85,385 Mil.
Total Assets was $410,951 Mil.
Property, Plant and Equipment(Net PPE) was $233,822 Mil.
Depreciation, Depletion and Amortization(DDA) was $26,684 Mil.
Selling, General & Admin. Expense(SGA) was $11,407 Mil.
Total Current Liabilities was $70,783 Mil.
Long-Term Debt was $83,009 Mil.
Net Income was 3538 + 1541 + 1375 + 1175 = $7,629 Mil.
Non Operating Income was -317 + -2539 + -255 + -910 = $-4,021 Mil.
Cash Flow from Operations was 9508 + 9170 + 8492 + 2292 = $29,462 Mil.
Accounts Receivable was $52,835 Mil.
Revenue was 49732 + 60176 + 69184 + 73950 = $253,042 Mil.
Gross Profit was 9681 + 9495 + 10153 + 15003 = $44,332 Mil.
Total Current Assets was $81,250 Mil.
Total Assets was $416,304 Mil.
Property, Plant and Equipment(Net PPE) was $245,133 Mil.
Depreciation, Depletion and Amortization(DDA) was $28,257 Mil.
Selling, General & Admin. Expense(SGA) was $12,168 Mil.
Total Current Liabilities was $78,465 Mil.
Long-Term Debt was $73,005 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)
=(44201 / 263612) / (52835 / 253042)
=0.16767446 / 0.20879933
=0.803

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)
=(44332 / 253042) / (54731 / 263612)
=0.17519621 / 0.20761953
=0.8438

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 - (85385 + 233822) / 410951) / (1 - (81250 + 245133) / 416304)
=0.22324803 / 0.21599841
=1.0336

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
=263612 / 253042
=1.0418

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))
=(28257 / (28257 + 245133)) / (26684 / (26684 + 233822))
=0.10335784 / 0.10243142
=1.009

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)
=(11407 / 263612) / (12168 / 253042)
=0.04327193 / 0.04808688
=0.8999

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)
=((83009 + 70783) / 410951) / ((73005 + 78465) / 416304)
=0.3742344 / 0.36384469
=1.0286

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
=(7629 - -4021 - 29462) / 410951
=-0.0433

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.

Royal Dutch Shell PLC has a M-score of -2.89 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.

Royal Dutch Shell PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.22441.48721.17660.89090.88530.50871.65870.9791.2410.6381
GMI 1.05491.07710.80561.02641.02791.0191.04890.98910.94520.889
AQI 1.08210.97671.15180.94620.93660.92890.96440.98961.09091.1458
SGI 1.11581.30390.61461.32621.28120.99420.95410.93850.63090.882
DEPI 0.96641.05761.09771.00471.23111.02340.77580.89260.88571.3317
SGAI 0.90640.75051.6710.67170.72181.01321.06331.0141.35691.1476
LVGI 1.0781.06640.9371.05680.9430.91840.99970.97391.03191.0477
TATA -0.0473-0.0702-0.029-0.02250.0012-0.0395-0.0643-0.0738-0.0711-0.029
M-score -2.34-2.03-2.92-2.36-2.25-3.11-2.24-2.92-3.00-3.06

Royal Dutch Shell PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.9790.95431.02921.21921.2411.56761.40951.24440.63810.803
GMI 0.98910.96261.00571.01850.94520.99611.01610.92410.8890.8438
AQI 0.98960.96891.00331.02251.09091.20971.2021.21311.14581.0336
SGI 0.93850.85080.75870.68240.63090.6520.69020.76150.8821.0418
DEPI 0.89261.09621.25720.91660.88570.99430.82441.41761.33171.009
SGAI 1.0141.08661.14941.2511.35691.39021.40031.31191.14760.8999
LVGI 0.97390.92470.96471.05911.03191.07961.07971.04111.04771.0286
TATA -0.0738-0.0523-0.052-0.0844-0.0711-0.0554-0.0518-0.0241-0.029-0.0433
M-score -2.92-2.91-2.89-3.01-3.00-2.54-2.65-2.55-3.06-2.89
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