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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 -2.60.
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 * 1.0164||+||0.528 * 0.9968||+||0.404 * 0.9688||+||0.892 * 0.9871||+||0.115 * 1.0676|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9859||+||4.679 * 0.0062||-||0.327 * 0.8435|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $89.4 Mil.|
Revenue was 162.701 + 142.204 + 139.013 + 158.078 = $602.0 Mil.
Gross Profit was 78.955 + 65.794 + 62.439 + 70.649 = $277.8 Mil.
Total Current Assets was $344.2 Mil.
Total Assets was $636.6 Mil.
Property, Plant and Equipment(Net PPE) was $74.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.7 Mil.
Selling, General & Admin. Expense(SGA) was $124.0 Mil.
Total Current Liabilities was $103.0 Mil.
Long-Term Debt was $27.9 Mil.
Net Income was 10.228 + 5.014 + 5.718 + 7.067 = $28.0 Mil.
Non Operating Income was 0.859 + 1.847 + 1.29 + 2.112 = $6.1 Mil.
Cash Flow from Operations was 4.941 + 15.676 + -4.722 + 2.055 = $18.0 Mil.
|Accounts Receivable was $89.1 Mil.
Revenue was 160.138 + 142.835 + 143.982 + 162.892 = $609.8 Mil.
Gross Profit was 68.246 + 65.563 + 68.483 + 78.257 = $280.5 Mil.
Total Current Assets was $384.8 Mil.
Total Assets was $709.0 Mil.
Property, Plant and Equipment(Net PPE) was $73.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.6 Mil.
Selling, General & Admin. Expense(SGA) was $127.4 Mil.
Total Current Liabilities was $144.1 Mil.
Long-Term Debt was $28.8 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)|
|=||(89.386 / 601.996)||/||(89.088 / 609.847)|
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)|
|=||(280.549 / 609.847)||/||(277.837 / 601.996)|
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 - (344.235 + 74.115) / 636.558)||/||(1 - (384.775 + 73.347) / 708.988)|
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))|
|=||(14.634 / (14.634 + 73.347))||/||(13.678 / (13.678 + 74.115))|
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)|
|=||(124.006 / 601.996)||/||(127.418 / 609.847)|
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)|
|=||((27.9 + 103.021) / 636.558)||/||((28.8 + 144.076) / 708.988)|
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|
|=||(28.027 - 6.108||-||17.95)||/||636.558|
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 -2.40 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