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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.
Adtran, Inc. has a M-score of -2.19 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Adtran, Inc. was -1.49. The lowest was -3.50. And the median was -2.60.
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 Adtran, 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 * 1.2834||+||0.528 * 1.0113||+||0.404 * 1.102||+||0.892 * 1.0268||+||0.115 * 0.9852|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.979||+||4.679 * -0.005||-||0.327 * 1.0514|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $129.5 Mil.|
Revenue was 147.004 + 159.094 + 177.404 + 162.233 = $645.7 Mil.
Gross Profit was 77.79 + 76.864 + 82.547 + 79.798 = $317.0 Mil.
Total Current Assets was $379.0 Mil.
Total Assets was $791.3 Mil.
Property, Plant and Equipment(Net PPE) was $75.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.5 Mil.
Selling, General & Admin. Expense(SGA) was $132.7 Mil.
Total Current Liabilities was $120.0 Mil.
Long-Term Debt was $30.0 Mil.
Net Income was 9.607 + 11.84 + 16.205 + 9.859 = $47.5 Mil.
Non Operating Income was 2.314 + 2.275 + 1.773 + 1.682 = $8.0 Mil.
Cash Flow from Operations was 9.899 + 7.775 + 22.558 + 3.183 = $43.4 Mil.
|Accounts Receivable was $98.3 Mil.
Revenue was 143.013 + 139.756 + 162.125 + 183.998 = $628.9 Mil.
Gross Profit was 69.677 + 67.383 + 79.972 + 95.201 = $312.2 Mil.
Total Current Assets was $459.3 Mil.
Total Assets was $874.3 Mil.
Property, Plant and Equipment(Net PPE) was $77.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.6 Mil.
Selling, General & Admin. Expense(SGA) was $132.0 Mil.
Total Current Liabilities was $111.7 Mil.
Long-Term Debt was $46.0 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)|
|=||(129.491 / 645.735)||/||(98.266 / 628.892)|
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)|
|=||(76.864 / 628.892)||/||(77.79 / 645.735)|
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 - (379.048 + 75.885) / 791.301)||/||(1 - (459.3 + 77.781) / 874.336)|
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))|
|=||(14.647 / (14.647 + 77.781))||/||(14.545 / (14.545 + 75.885))|
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)|
|=||(132.702 / 645.735)||/||(132.015 / 628.892)|
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)|
|=||((30 + 120.033) / 791.301)||/||((46 + 111.677) / 874.336)|
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|
|=||(47.511 - 8.044||-||43.415)||/||791.301|
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.
Adtran, Inc. has a M-score of -2.19 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
Adtran, Inc. Annual Data
Adtran, Inc. Quarterly Data