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Applied Materials Inc (NAS:AMAT)
Beneish M-Score
-2.73 (As of Today)

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.

Applied Materials Inc has a M-score of -2.73 suggests that the company is not a manipulator.

AMAT' s 10-Year Beneish M-Score Range
Min: -3.31   Max: 0.04
Current: -2.73

-3.31
0.04

During the past 13 years, the highest Beneish M-Score of Applied Materials Inc was 0.04. The lowest was -3.31. And the median was -2.62.


Definition

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 Applied Materials 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 * 0.8465+0.528 * 0.9403+0.404 * 0.8804+0.892 * 1.2082+0.115 * 1.0725
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8203+4.679 * -0.055-0.327 * 0.9935
=-2.73

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Oct14) TTM:Last Year (Oct13) TTM:
Accounts Receivable was $1,670 Mil.
Revenue was 2264 + 2265 + 2353 + 2190 = $9,072 Mil.
Gross Profit was 959 + 992 + 1001 + 891 = $3,843 Mil.
Total Current Assets was $6,967 Mil.
Total Assets was $13,174 Mil.
Property, Plant and Equipment(Net PPE) was $861 Mil.
Depreciation, Depletion and Amortization(DDA) was $375 Mil.
Selling, General & Admin. Expense(SGA) was $890 Mil.
Total Current Liabilities was $2,823 Mil.
Long-Term Debt was $1,947 Mil.
Net Income was 256 + 301 + 262 + 253 = $1,072 Mil.
Non Operating Income was 0 + 0 + 0 + -3 = $-3 Mil.
Cash Flow from Operations was 407 + 584 + 437 + 372 = $1,800 Mil.
Accounts Receivable was $1,633 Mil.
Revenue was 1988 + 1975 + 1973 + 1573 = $7,509 Mil.
Gross Profit was 795 + 806 + 808 + 582 = $2,991 Mil.
Total Current Assets was $5,642 Mil.
Total Assets was $12,043 Mil.
Property, Plant and Equipment(Net PPE) was $850 Mil.
Depreciation, Depletion and Amortization(DDA) was $410 Mil.
Selling, General & Admin. Expense(SGA) was $898 Mil.
Total Current Liabilities was $2,443 Mil.
Long-Term Debt was $1,946 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1670 / 9072) / (1633 / 7509)
=0.18408289 / 0.21747237
=0.8465

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(992 / 7509) / (959 / 9072)
=0.39832201 / 0.42361111
=0.9403

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (6967 + 861) / 13174) / (1 - (5642 + 850) / 12043)
=0.4057993 / 0.46093166
=0.8804

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=9072 / 7509
=1.2082

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))
=(410 / (410 + 850)) / (375 / (375 + 861))
=0.32539683 / 0.30339806
=1.0725

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)
=(890 / 9072) / (898 / 7509)
=0.09810406 / 0.11958983
=0.8203

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)
=((1947 + 2823) / 13174) / ((1946 + 2443) / 12043)
=0.36207682 / 0.36444408
=0.9935

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1072 - -3 - 1800) / 13174
=-0.055

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.

Applied Materials Inc has a M-score of -2.73 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Applied Materials Inc Annual Data

Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14
DSRI 1.10860.95660.95250.98810.99860.9230.75970.96061.55420.8465
GMI 1.04660.94271.01451.08971.4840.73350.93841.0910.95390.9403
AQI 7.26870.89381.12421.04760.98921.00640.64832.64210.9160.8804
SGI 0.87261.31111.06190.83510.61671.90461.10140.8290.86121.2082
DEPI 1.09910.91341.02710.89861.07370.87621.08730.69830.97361.0725
SGAI 1.06340.99170.98911.21351.2340.67330.86841.44050.96910.8203
LVGI 0.86411.44460.87011.17990.78171.26411.21051.01731.04740.9935
TATA -0.0152-0.0439-0.0441-0.0713-0.0542-0.0705-0.0361-0.1425-0.0305-0.0553
M-score 0.04-2.67-2.57-3.01-2.79-2.26-2.99-2.74-2.31-2.73

Applied Materials Inc Quarterly Data

Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14
DSRI 1.02730.96050.87010.91930.98421.55421.35771.12211.12960.8465
GMI 1.08921.09081.04281.02420.99570.95420.94510.93950.92840.9403
AQI 2.32612.64211.08291.02280.97820.9160.84750.86660.8690.8804
SGI 0.82460.82910.80880.7770.77450.86121.00281.12891.22731.2082
DEPI 0.78140.69830.7460.83110.92440.97360.9881.02391.03451.0725
SGAI 1.39551.43881.26031.18861.11840.96910.8610.80790.8130.8203
LVGI 0.88231.01731.02221.06691.07991.04741.0861.03531.03650.9935
TATA -0.0793-0.1425-0.1403-0.1441-0.1228-0.0305-0.0411-0.0257-0.0319-0.055
M-score -2.45-2.74-3.45-3.48-3.34-2.31-2.44-2.43-2.37-2.73
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