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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.
Applied Materials Inc has a M-score of -2.44 suggests that the company is not a 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 -2.57.
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 * 1.3577||+||0.528 * 0.9451||+||0.404 * 0.8475||+||0.892 * 1.0028||+||0.115 * 0.988|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8649||+||4.679 * -0.0407||-||0.327 * 1.086|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $1,510 Mil.|
Revenue was 2190 + 1988 + 1975 + 1973 = $8,126 Mil.
Gross Profit was 891 + 795 + 806 + 808 = $3,300 Mil.
Total Current Assets was $6,014 Mil.
Total Assets was $12,199 Mil.
Property, Plant and Equipment(Net PPE) was $846 Mil.
Depreciation, Depletion and Amortization(DDA) was $398 Mil.
Selling, General & Admin. Expense(SGA) was $870 Mil.
Total Current Liabilities was $2,477 Mil.
Long-Term Debt was $1,946 Mil.
Net Income was 253 + 183 + 168 + -129 = $475 Mil.
Non Operating Income was -3 + -1 + -3 + 0 = $-7 Mil.
Cash Flow from Operations was 372 + 19 + 364 + 224 = $979 Mil.
|Accounts Receivable was $1,109 Mil.
Revenue was 1573 + 1646 + 2343 + 2541 = $8,103 Mil.
Gross Profit was 582 + 587 + 930 + 1011 = $3,110 Mil.
Total Current Assets was $4,765 Mil.
Total Assets was $11,714 Mil.
Property, Plant and Equipment(Net PPE) was $900 Mil.
Depreciation, Depletion and Amortization(DDA) was $416 Mil.
Selling, General & Admin. Expense(SGA) was $1,003 Mil.
Total Current Liabilities was $1,965 Mil.
Long-Term Debt was $1,946 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)|
|=||(1510 / 8126)||/||(1109 / 8103)|
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)|
|=||(795 / 8103)||/||(891 / 8126)|
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 - (6014 + 846) / 12199)||/||(1 - (4765 + 900) / 11714)|
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))|
|=||(416 / (416 + 900))||/||(398 / (398 + 846))|
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)|
|=||(870 / 8126)||/||(1003 / 8103)|
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)|
|=||((1946 + 2477) / 12199)||/||((1946 + 1965) / 11714)|
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|
|=||(475 - -7||-||979)||/||12199|
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 -2.44 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