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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.
Adobe Systems Inc has a M-score of -2.75 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Adobe Systems Inc was -0.71. The lowest was -4.12. And the median was -2.89.
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 Adobe Systems 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 * 1.1714||+||0.528 * 1.0228||+||0.404 * 1.0963||+||0.892 * 0.9654||+||0.115 * 0.9788|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1094||+||4.679 * -0.0822||-||0.327 * 1.1143|
|This Year (May14) TTM:||Last Year (May13) TTM:|
|Accounts Receivable was $532 Mil.|
Revenue was 1068.208 + 1000.12 + 1041.699 + 995.119 = $4,105 Mil.
Gross Profit was 913.304 + 851.611 + 894.183 + 848.043 = $3,507 Mil.
Total Current Assets was $4,114 Mil.
Total Assets was $10,372 Mil.
Property, Plant and Equipment(Net PPE) was $642 Mil.
Depreciation, Depletion and Amortization(DDA) was $319 Mil.
Selling, General & Admin. Expense(SGA) was $2,192 Mil.
Total Current Liabilities was $2,218 Mil.
Long-Term Debt was $897 Mil.
Net Income was 88.527 + 47.046 + 65.32 + 83.002 = $284 Mil.
Non Operating Income was -2.124 + -2.398 + -3.111 + -5.679 = $-13 Mil.
Cash Flow from Operations was 367.536 + 251.673 + 314.982 + 215.525 = $1,150 Mil.
|Accounts Receivable was $470 Mil.
Revenue was 1010.549 + 1007.873 + 1153.428 + 1080.58 = $4,252 Mil.
Gross Profit was 875.268 + 851.189 + 1028.45 + 960.959 = $3,716 Mil.
Total Current Assets was $4,558 Mil.
Total Assets was $10,280 Mil.
Property, Plant and Equipment(Net PPE) was $646 Mil.
Depreciation, Depletion and Amortization(DDA) was $310 Mil.
Selling, General & Admin. Expense(SGA) was $2,046 Mil.
Total Current Liabilities was $1,265 Mil.
Long-Term Debt was $1,506 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(531.557 / 4105.146)||/||(470.052 / 4252.43)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(851.611 / 4252.43)||/||(913.304 / 4105.146)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (4114.343 + 642.45) / 10372.199)||/||(1 - (4557.657 + 645.865) / 10280.369)|
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.
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))|
|=||(310.433 / (310.433 + 645.865))||/||(318.814 / (318.814 + 642.45))|
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)|
|=||(2191.707 / 4105.146)||/||(2046.399 / 4252.43)|
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)|
|=||((896.551 + 2217.972) / 10372.199)||/||((1505.56 + 1264.855) / 10280.369)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(283.895 - -13.312||-||1149.716)||/||10372.199|
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.
Adobe Systems Inc has a M-score of -2.75 suggests that the company will not be a manipulator.
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
Adobe Systems Inc Annual Data
Adobe Systems Inc Quarterly Data