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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 -0.90. The lowest was -4.18. And the median was -2.77.
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 * 1.0122||+||0.528 * 0.9891||+||0.404 * 0.9233||+||0.892 * 1.217||+||0.115 * 1.0022|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9113||+||4.679 * -0.0774||-||0.327 * 1.0374|
|This Year (Aug16) TTM:||Last Year (Aug15) TTM:|
|Accounts Receivable was $731 Mil.|
Revenue was 1463.967 + 1398.709 + 1383.335 + 1306.404 = $5,552 Mil.
Gross Profit was 1261.266 + 1196.63 + 1184.763 + 1105.043 = $4,748 Mil.
Total Current Assets was $5,419 Mil.
Total Assets was $12,367 Mil.
Property, Plant and Equipment(Net PPE) was $812 Mil.
Depreciation, Depletion and Amortization(DDA) was $336 Mil.
Selling, General & Admin. Expense(SGA) was $2,420 Mil.
Total Current Liabilities was $2,506 Mil.
Long-Term Debt was $1,917 Mil.
Net Income was 270.788 + 244.074 + 254.307 + 222.705 = $992 Mil.
Non Operating Income was -7.592 + -8.717 + -7.659 + 14.789 = $-9 Mil.
Cash Flow from Operations was 517.885 + 488.715 + 497.527 + 454.515 = $1,959 Mil.
|Accounts Receivable was $594 Mil.
Revenue was 1217.768 + 1162.158 + 1109.181 + 1073.328 = $4,562 Mil.
Gross Profit was 1026.783 + 976.985 + 942.383 + 912.385 = $3,859 Mil.
Total Current Assets was $4,526 Mil.
Total Assets was $11,508 Mil.
Property, Plant and Equipment(Net PPE) was $797 Mil.
Depreciation, Depletion and Amortization(DDA) was $331 Mil.
Selling, General & Admin. Expense(SGA) was $2,182 Mil.
Total Current Liabilities was $2,061 Mil.
Long-Term Debt was $1,906 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)|
|=||(731.166 / 5552.415)||/||(593.554 / 4562.435)|
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)|
|=||(3858.536 / 4562.435)||/||(4747.702 / 5552.415)|
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 - (5418.71 + 811.524) / 12367.441)||/||(1 - (4525.888 + 797.464) / 11508.395)|
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))|
|=||(331.261 / (331.261 + 797.464))||/||(336.034 / (336.034 + 811.524))|
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)|
|=||(2419.912 / 5552.415)||/||(2182.033 / 4562.435)|
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)|
|=||((1916.591 + 2505.666) / 12367.441)||/||((1906.094 + 2060.814) / 11508.395)|
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|
|=||(991.874 - -9.179||-||1958.642)||/||12367.441|
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 -2.67 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