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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 Applied Materials Inc was 0.04. The lowest was -3.61. And the median was -2.52.
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 * 1.015||+||0.528 * 0.9759||+||0.404 * 0.916||+||0.892 * 1.0969||+||0.115 * 1.0587|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.929||+||4.679 * -0.0059||-||0.327 * 0.9309|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|Accounts Receivable was $1,798 Mil.|
Revenue was 2442 + 2359 + 2264 + 2265 = $9,330 Mil.
Gross Profit was 1016 + 959 + 959 + 992 = $3,926 Mil.
Total Current Assets was $7,447 Mil.
Total Assets was $13,587 Mil.
Property, Plant and Equipment(Net PPE) was $887 Mil.
Depreciation, Depletion and Amortization(DDA) was $369 Mil.
Selling, General & Admin. Expense(SGA) was $910 Mil.
Total Current Liabilities was $2,696 Mil.
Long-Term Debt was $1,947 Mil.
Net Income was 364 + 348 + 256 + 301 = $1,269 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 298 + 60 + 407 + 584 = $1,349 Mil.
|Accounts Receivable was $1,615 Mil.
Revenue was 2353 + 2190 + 1988 + 1975 = $8,506 Mil.
Gross Profit was 1001 + 891 + 795 + 806 = $3,493 Mil.
Total Current Assets was $6,401 Mil.
Total Assets was $12,555 Mil.
Property, Plant and Equipment(Net PPE) was $855 Mil.
Depreciation, Depletion and Amortization(DDA) was $386 Mil.
Selling, General & Admin. Expense(SGA) was $893 Mil.
Total Current Liabilities was $2,662 Mil.
Long-Term Debt was $1,947 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)|
|=||(1798 / 9330)||/||(1615 / 8506)|
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)|
|=||(959 / 8506)||/||(1016 / 9330)|
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 - (7447 + 887) / 13587)||/||(1 - (6401 + 855) / 12555)|
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))|
|=||(386 / (386 + 855))||/||(369 / (369 + 887))|
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)|
|=||(910 / 9330)||/||(893 / 8506)|
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 + 2696) / 13587)||/||((1947 + 2662) / 12555)|
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|
|=||(1269 - 0||-||1349)||/||13587|
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 -2.41 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
Applied Materials Inc Annual Data
Applied Materials Inc Quarterly Data