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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 * 0.8923||+||0.528 * 1.01||+||0.404 * 1.026||+||0.892 * 1.0597||+||0.115 * 1.1358|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9411||+||4.679 * -0.0859||-||0.327 * 1.1458|
|This Year (May15) TTM:||Last Year (May14) TTM:|
|Accounts Receivable was $503 Mil.|
Revenue was 1162.158 + 1109.181 + 1073.328 + 1005.409 = $4,350 Mil.
Gross Profit was 976.985 + 942.383 + 912.385 + 847.685 = $3,679 Mil.
Total Current Assets was $4,178 Mil.
Total Assets was $11,165 Mil.
Property, Plant and Equipment(Net PPE) was $785 Mil.
Depreciation, Depletion and Amortization(DDA) was $324 Mil.
Selling, General & Admin. Expense(SGA) was $2,186 Mil.
Total Current Liabilities was $1,937 Mil.
Long-Term Debt was $1,904 Mil.
Net Income was 147.493 + 84.888 + 88.136 + 44.686 = $365 Mil.
Non Operating Income was -2.884 + -1.52 + 8.83 + -3.151 = $1 Mil.
Cash Flow from Operations was 471.484 + 183.015 + 399.753 + 268.52 = $1,323 Mil.
|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.
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)|
|=||(502.617 / 4350.076)||/||(531.557 / 4105.146)|
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)|
|=||(942.383 / 4105.146)||/||(976.985 / 4350.076)|
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 - (4178.397 + 785.199) / 11165.383)||/||(1 - (4114.343 + 642.45) / 10372.199)|
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))|
|=||(318.814 / (318.814 + 642.45))||/||(323.865 / (323.865 + 785.199))|
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)|
|=||(2185.575 / 4350.076)||/||(2191.707 / 4105.146)|
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)|
|=||((1904.376 + 1937.033) / 11165.383)||/||((896.551 + 2217.972) / 10372.199)|
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|
|=||(365.203 - 1.275||-||1322.772)||/||11165.383|
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 -2.93 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