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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.
During the past 13 years, the highest Beneish M-Score of Adobe Systems Inc was -0.68. The lowest was -4.18. And the median was -2.90.
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 * 0.9648||+||0.528 * 1.0063||+||0.404 * 0.9156||+||0.892 * 1.0226||+||0.115 * 1.1473|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.003||+||4.679 * -0.0946||-||0.327 * 1.0835|
|This Year (Nov14) TTM:||Last Year (Nov13) TTM:|
|Accounts Receivable was $592 Mil.|
Revenue was 1073.328 + 1005.409 + 1068.208 + 1000.12 = $4,147 Mil.
Gross Profit was 912.385 + 847.685 + 913.304 + 851.611 = $3,525 Mil.
Total Current Assets was $4,602 Mil.
Total Assets was $10,786 Mil.
Property, Plant and Equipment(Net PPE) was $785 Mil.
Depreciation, Depletion and Amortization(DDA) was $314 Mil.
Selling, General & Admin. Expense(SGA) was $2,196 Mil.
Total Current Liabilities was $2,494 Mil.
Long-Term Debt was $911 Mil.
Net Income was 88.136 + 44.686 + 88.527 + 47.046 = $268 Mil.
Non Operating Income was 8.83 + -3.151 + -2.124 + -2.398 = $1 Mil.
Cash Flow from Operations was 399.753 + 268.52 + 367.536 + 251.673 = $1,287 Mil.
|Accounts Receivable was $600 Mil.
Revenue was 1041.699 + 995.119 + 1010.549 + 1007.873 = $4,055 Mil.
Gross Profit was 894.183 + 848.043 + 875.268 + 851.189 = $3,469 Mil.
Total Current Assets was $4,046 Mil.
Total Assets was $10,380 Mil.
Property, Plant and Equipment(Net PPE) was $660 Mil.
Depreciation, Depletion and Amortization(DDA) was $321 Mil.
Selling, General & Admin. Expense(SGA) was $2,141 Mil.
Total Current Liabilities was $1,526 Mil.
Long-Term Debt was $1,499 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)|
|=||(591.8 / 4147.065)||/||(599.82 / 4055.24)|
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)|
|=||(847.685 / 4055.24)||/||(912.385 / 4147.065)|
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 - (4602.328 + 785.123) / 10785.829)||/||(1 - (4045.929 + 659.774) / 10380.298)|
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))|
|=||(321.227 / (321.227 + 659.774))||/||(313.59 / (313.59 + 785.123))|
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)|
|=||(2195.64 / 4147.065)||/||(2140.578 / 4055.24)|
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)|
|=||((911.086 + 2494.435) / 10785.829)||/||((1499.297 + 1525.648) / 10380.298)|
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|
|=||(268.395 - 1.157||-||1287.482)||/||10785.829|
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 -2.98 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