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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 Adtran Inc was 14881.24. The lowest was -14529.48. And the median was -2.58.
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 * 0.925||+||0.528 * 1.0986||+||0.404 * 0.8249||+||0.892 * 0.9379||+||0.115 * 0.997|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9987||+||4.679 * -0.0391||-||0.327 * 1.1848|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $86.2 Mil.|
Revenue was 158.078 + 160.138 + 142.835 + 143.982 = $605.0 Mil.
Gross Profit was 70.649 + 68.246 + 65.563 + 68.483 = $272.9 Mil.
Total Current Assets was $357.0 Mil.
Total Assets was $671.9 Mil.
Property, Plant and Equipment(Net PPE) was $73.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.5 Mil.
Selling, General & Admin. Expense(SGA) was $125.0 Mil.
Total Current Liabilities was $127.0 Mil.
Long-Term Debt was $28.8 Mil.
Net Income was 7.067 + 2.544 + 3.317 + 9.292 = $22.2 Mil.
Non Operating Income was 2.112 + 2.708 + 2.762 + 2.849 = $10.4 Mil.
Cash Flow from Operations was 2.055 + 8.199 + 13.015 + 14.817 = $38.1 Mil.
|Accounts Receivable was $99.3 Mil.
Revenue was 162.892 + 176.129 + 147.004 + 159.094 = $645.1 Mil.
Gross Profit was 78.257 + 86.797 + 77.79 + 76.864 = $319.7 Mil.
Total Current Assets was $348.8 Mil.
Total Assets was $750.7 Mil.
Property, Plant and Equipment(Net PPE) was $75.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.7 Mil.
Selling, General & Admin. Expense(SGA) was $133.4 Mil.
Total Current Liabilities was $117.0 Mil.
Long-Term Debt was $30.0 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)|
|=||(86.176 / 605.033)||/||(99.341 / 645.119)|
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)|
|=||(68.246 / 645.119)||/||(70.649 / 605.033)|
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 - (356.959 + 73.656) / 671.854)||/||(1 - (348.76 + 75.201) / 750.734)|
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))|
|=||(14.734 / (14.734 + 75.201))||/||(14.483 / (14.483 + 73.656))|
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)|
|=||(124.996 / 605.033)||/||(133.449 / 645.119)|
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)|
|=||((28.8 + 127.048) / 671.854)||/||((30 + 116.987) / 750.734)|
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|
|=||(22.22 - 10.431||-||38.086)||/||671.854|
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 -2.87 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
Adtran Inc Annual Data
Adtran Inc Quarterly Data