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Adobe Systems Inc (NAS:ADBE)
Beneish M-Score
-2.75 (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.

Adobe Systems Inc has a M-score of -2.75 suggests that the company is not a manipulator.

ADBE' s 10-Year Beneish M-Score Range
Min: -4.14   Max: -0.69
Current: -2.75

-4.14
-0.69

During the past 13 years, the highest Beneish M-Score of Adobe Systems Inc was -0.69. The lowest was -4.14. And the median was -2.88.


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 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
=-2.75

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

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

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)
=(531.557 / 4105.146) / (470.052 / 4252.43)
=0.12948553 / 0.11053727
=1.1714

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)
=(851.611 / 4252.43) / (913.304 / 4105.146)
=0.87382179 / 0.85432796
=1.0228

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 - (4114.343 + 642.45) / 10372.199) / (1 - (4557.657 + 645.865) / 10280.369)
=0.54139011 / 0.49383899
=1.0963

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
=4105.146 / 4252.43
=0.9654

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))
=0.32461952 / 0.33166123
=0.9788

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)
=0.53389258 / 0.4812305
=1.1094

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)
=0.30027606 / 0.26948595
=1.1143

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
=(283.895 - -13.312 - 1149.716) / 10372.199
=-0.0822

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.


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 own currency.

Adobe Systems Inc Annual Data

Nov04Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Nov13
DSRI 0.74741.03641.5240.7241.1361.06871.04591.03140.93161.0553
GMI 0.99020.99431.06350.99860.98770.99941.00610.99741.00671.0407
AQI 1.64070.85543.55531.04360.95481.27420.90580.94910.95651.0952
SGI 1.28721.17991.30971.22621.13360.82291.28991.10951.04450.9209
DEPI 1.02650.98880.66611.10381.1251.10011.0671.16581.08890.9496
SGAI 0.93810.97731.10740.93180.99931.09090.98530.99691.03761.1914
LVGI 0.8210.85420.57711.31331.2811.32531.2520.96650.90561.0498
TATA -0.1204-0.0517-0.081-0.1247-0.0707-0.0981-0.0397-0.0766-0.065-0.081
M-score -2.69-2.54-0.95-3.18-2.67-3.03-2.47-2.70-2.79-2.87

Adobe Systems Inc Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
DSRI 0.90030.86970.93710.93160.91960.90520.9741.05531.13361.1714
GMI 0.9971.00191.0031.00671.02091.02291.03171.04071.02451.0228
AQI 1.02530.99650.97470.95650.90360.92111.07041.09521.09821.0963
SGI 1.06671.07061.08111.04451.03130.98090.94650.92090.9270.9654
DEPI 1.17441.14191.09751.08891.07611.0210.98960.94960.93330.9788
SGAI 1.031.03511.02621.03761.06881.10621.14371.19141.15271.1094
LVGI 0.95390.95530.92710.90560.95170.9190.9981.04981.07641.1143
TATA -0.0786-0.0835-0.0744-0.0643-0.0761-0.0753-0.0824-0.0814-0.0775-0.0822
M-score -2.84-2.90-2.79-2.78-2.90-2.95-2.92-2.88-2.79-2.75
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