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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 Analog Devices Inc was -0.59. The lowest was -3.54. And the median was -2.62.
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 Analog Devices 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 * 0.9031||+||0.528 * 0.9888||+||0.404 * 0.9088||+||0.892 * 1.0814||+||0.115 * 0.9558|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8667||+||4.679 * -0.0375||-||0.327 * 1.4358|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $399 Mil.|
Revenue was 778.766 + 769.429 + 978.722 + 863.365 = $3,390 Mil.
Gross Profit was 510.903 + 477.293 + 641.796 + 569.037 = $2,199 Mil.
Total Current Assets was $4,628 Mil.
Total Assets was $7,570 Mil.
Property, Plant and Equipment(Net PPE) was $626 Mil.
Depreciation, Depletion and Amortization(DDA) was $212 Mil.
Selling, General & Admin. Expense(SGA) was $461 Mil.
Total Current Liabilities was $685 Mil.
Long-Term Debt was $1,731 Mil.
Net Income was 170.573 + 164.504 + 96.305 + 216.478 = $648 Mil.
Non Operating Income was 0.743 + -3.005 + 0.443 + -1.265 = $-3 Mil.
Cash Flow from Operations was 320.203 + 219.705 + 197.975 + 197.139 = $935 Mil.
|Accounts Receivable was $409 Mil.
Revenue was 821.019 + 771.986 + 814.247 + 727.752 = $3,135 Mil.
Gross Profit was 544.822 + 503.607 + 486.037 + 476.29 = $2,011 Mil.
Total Current Assets was $4,046 Mil.
Total Assets was $7,048 Mil.
Property, Plant and Equipment(Net PPE) was $630 Mil.
Depreciation, Depletion and Amortization(DDA) was $201 Mil.
Selling, General & Admin. Expense(SGA) was $492 Mil.
Total Current Liabilities was $1,068 Mil.
Long-Term Debt was $498 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)|
|=||(398.979 / 3390.282)||/||(408.51 / 3135.004)|
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)|
|=||(2010.756 / 3135.004)||/||(2199.029 / 3390.282)|
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 - (4627.874 + 626.162) / 7570.292)||/||(1 - (4045.761 + 629.665) / 7048.475)|
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))|
|=||(200.768 / (200.768 + 629.665))||/||(212.017 / (212.017 + 626.162))|
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)|
|=||(461.078 / 3390.282)||/||(491.955 / 3135.004)|
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)|
|=||((1731.336 + 684.6) / 7570.292)||/||((498.399 + 1068.219) / 7048.475)|
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|
|=||(647.86 - -3.084||-||935.022)||/||7570.292|
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.
Analog Devices Inc has a M-score of -2.84 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
Analog Devices Inc Annual Data
Analog Devices Inc Quarterly Data