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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.
Analog Devices Inc has a M-score of -1.46 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Analog Devices Inc was -0.69. The lowest was -3.56. And the median was -2.64.
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 * 1.1101||+||0.528 * 0.973||+||0.404 * 4.1545||+||0.892 * 1.0295||+||0.115 * 1.1765|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0593||+||4.679 * -0.0284||-||0.327 * 1.753|
|This Year (Jul14) TTM:||Last Year (Jul13) TTM:|
|Accounts Receivable was $395 Mil.|
Revenue was 727.752 + 694.536 + 628.238 + 678.133 = $2,729 Mil.
Gross Profit was 476.29 + 458.743 + 409.118 + 444.87 = $1,789 Mil.
Total Current Assets was $5,924 Mil.
Total Assets was $8,973 Mil.
Property, Plant and Equipment(Net PPE) was $610 Mil.
Depreciation, Depletion and Amortization(DDA) was $112 Mil.
Selling, General & Admin. Expense(SGA) was $431 Mil.
Total Current Liabilities was $2,623 Mil.
Long-Term Debt was $873 Mil.
Net Income was 180.606 + 187.433 + 152.586 + 201.554 = $722 Mil.
Non Operating Income was -0.422 + 0.441 + -0.431 + 85.958 = $86 Mil.
Cash Flow from Operations was 213.442 + 238.424 + 157.473 + 282.165 = $892 Mil.
|Accounts Receivable was $345 Mil.
Revenue was 674.172 + 659.25 + 622.134 + 694.964 = $2,651 Mil.
Gross Profit was 435.062 + 422.195 + 390.284 + 443.282 = $1,691 Mil.
Total Current Assets was $5,244 Mil.
Total Assets was $6,139 Mil.
Property, Plant and Equipment(Net PPE) was $492 Mil.
Depreciation, Depletion and Amortization(DDA) was $110 Mil.
Selling, General & Admin. Expense(SGA) was $396 Mil.
Total Current Liabilities was $492 Mil.
Long-Term Debt was $872 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)|
|=||(394.762 / 2728.659)||/||(345.437 / 2650.52)|
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)|
|=||(458.743 / 2650.52)||/||(476.29 / 2728.659)|
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 - (5923.884 + 609.937) / 8973.465)||/||(1 - (5244.49 + 492.421) / 6138.626)|
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))|
|=||(110.384 / (110.384 + 492.421))||/||(112.437 / (112.437 + 609.937))|
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)|
|=||(431.449 / 2728.659)||/||(395.645 / 2650.52)|
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)|
|=||((872.652 + 2622.526) / 8973.465)||/||((872.104 + 491.809) / 6138.626)|
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|
|=||(722.179 - 85.546||-||891.504)||/||8973.465|
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 -1.46 signals that the company is likely to 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