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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 -2.87.
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 * 0.9448||+||0.528 * 1.0031||+||0.404 * 0.9127||+||0.892 * 1.1911||+||0.115 * 0.9557|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8837||+||4.679 * -0.0816||-||0.327 * 1.0404|
|This Year (Feb16) TTM:||Last Year (Feb15) TTM:|
|Accounts Receivable was $599 Mil.|
Revenue was 1383.335 + 1306.404 + 1217.768 + 1162.158 = $5,070 Mil.
Gross Profit was 1184.763 + 1105.043 + 1026.783 + 976.985 = $4,294 Mil.
Total Current Assets was $4,935 Mil.
Total Assets was $11,897 Mil.
Property, Plant and Equipment(Net PPE) was $795 Mil.
Depreciation, Depletion and Amortization(DDA) was $341 Mil.
Selling, General & Admin. Expense(SGA) was $2,299 Mil.
Total Current Liabilities was $2,232 Mil.
Long-Term Debt was $1,917 Mil.
Net Income was 254.307 + 222.705 + 174.465 + 147.493 = $799 Mil.
Non Operating Income was -7.659 + 0.622 + -4.275 + -2.884 = $-14 Mil.
Cash Flow from Operations was 497.527 + 454.515 + 360.488 + 471.484 = $1,784 Mil.
|Accounts Receivable was $532 Mil.
Revenue was 1109.181 + 1073.328 + 1005.409 + 1068.208 = $4,256 Mil.
Gross Profit was 942.383 + 912.385 + 847.685 + 913.304 = $3,616 Mil.
Total Current Assets was $3,972 Mil.
Total Assets was $11,008 Mil.
Property, Plant and Equipment(Net PPE) was $784 Mil.
Depreciation, Depletion and Amortization(DDA) was $316 Mil.
Selling, General & Admin. Expense(SGA) was $2,184 Mil.
Total Current Liabilities was $1,788 Mil.
Long-Term Debt was $1,902 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)|
|=||(599.207 / 5069.665)||/||(532.427 / 4256.126)|
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)|
|=||(1105.043 / 4256.126)||/||(1184.763 / 5069.665)|
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 - (4935.39 + 794.876) / 11896.682)||/||(1 - (3972.159 + 784.314) / 11008.422)|
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))|
|=||(315.589 / (315.589 + 784.314))||/||(341.038 / (341.038 + 794.876))|
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)|
|=||(2299.165 / 5069.665)||/||(2184.337 / 4256.126)|
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)|
|=||((1916.831 + 2231.806) / 11896.682)||/||((1901.554 + 1788.16) / 11008.422)|
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|
|=||(798.97 - -14.196||-||1784.014)||/||11896.682|
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 -2.77 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