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GuruFocus has detected 1 Warning Sign with Tesco PLC $TSCDY.
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Tesco PLC (OTCPK:TSCDY)
Beneish M-Score
-2.59 (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.

Tesco PLC has a M-score of -2.70 suggests that the company is not a manipulator.

TSCDY' s Beneish M-Score Range Over the Past 10 Years
Min: -4.92   Max: -1.96
Current: -2.59

-4.92
-1.96

During the past 13 years, the highest Beneish M-Score of Tesco PLC was -1.96. The lowest was -4.92. And the median was -4.58.


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 Tesco 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 * 1.0119+0.528 * 1.0161+0.404 * 1.0428+0.892 * 0.9072+0.115 * 1.0325
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9109+4.679 * -0.0443-0.327 * 0.9662
=-2.70

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

This Year (Feb17) TTM:Last Year (Feb16) TTM:
Accounts Receivable was $1,844 Mil.
Revenue was $69,896 Mil.
Gross Profit was $3,628 Mil.
Total Current Assets was $19,271 Mil.
Total Assets was $57,316 Mil.
Property, Plant and Equipment(Net PPE) was $22,635 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,630 Mil.
Selling, General & Admin. Expense(SGA) was $2,168 Mil.
Total Current Liabilities was $24,256 Mil.
Long-Term Debt was $11,791 Mil.
Net Income was $-50 Mil.
Non Operating Income was $0 Mil.
Cash Flow from Operations was $2,486 Mil.
Accounts Receivable was $2,009 Mil.
Revenue was $77,047 Mil.
Gross Profit was $4,063 Mil.
Total Current Assets was $20,977 Mil.
Total Assets was $62,720 Mil.
Property, Plant and Equipment(Net PPE) was $25,571 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,906 Mil.
Selling, General & Admin. Expense(SGA) was $2,623 Mil.
Total Current Liabilities was $25,523 Mil.
Long-Term Debt was $15,301 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)
=(1843.75 / 69896.25) / (2008.57142857 / 77047.1428571)
=0.02637838 / 0.02606938
=1.0119

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)
=(4062.85714286 / 77047.1428571) / (3627.5 / 69896.25)
=0.05273209 / 0.05189835
=1.0161

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 - (19271.25 + 22635) / 57316.25) / (1 - (20977.1428571 + 25571.4285714) / 62720)
=0.26885918 / 0.25783528
=1.0428

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
=69896.25 / 77047.1428571
=0.9072

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))
=(1905.71428571 / (1905.71428571 + 25571.4285714)) / (1630 / (1630 + 22635))
=0.06935635 / 0.06717494
=1.0325

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)
=(2167.5 / 69896.25) / (2622.85714286 / 77047.1428571)
=0.03101025 / 0.03404224
=0.9109

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)
=((11791.25 + 24256.25) / 57316.25) / ((15301.4285714 + 25522.8571429) / 62720)
=0.62892286 / 0.65089741
=0.9662

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
=(-50 - 0 - 2486.25) / 57316.25
=-0.0443

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.

Tesco PLC has a M-score of -2.70 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.

Tesco PLC Annual Data

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
DSRI 112.78421.0119
GMI 1.0384-1.6303-0.73391.0161
AQI 0.831.32710.96481.0428
SGI 1.07210.82970.88250.9072
DEPI 0.99920.85221.01751.0325
SGAI 1.11541.73440.75290.9109
LVGI 1.0561.12570.94480.9662
TATA -0.0441-0.1408-0.0453-0.0443
M-score -2.71-4.73-2.02-2.70
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