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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 -2.49.
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 * 1.13||+||0.528 * 1.0112||+||0.404 * 0.9526||+||0.892 * 1.0863||+||0.115 * 1.0463|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9206||+||4.679 * 0.0151||-||0.327 * 0.949|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $1,991 Mil.|
Revenue was 2490 + 2442 + 2359 + 2264 = $9,555 Mil.
Gross Profit was 1018 + 1016 + 959 + 959 = $3,952 Mil.
Total Current Assets was $7,043 Mil.
Total Assets was $13,153 Mil.
Property, Plant and Equipment(Net PPE) was $882 Mil.
Depreciation, Depletion and Amortization(DDA) was $369 Mil.
Selling, General & Admin. Expense(SGA) was $915 Mil.
Total Current Liabilities was $3,020 Mil.
Long-Term Debt was $1,547 Mil.
Net Income was 329 + 364 + 348 + 256 = $1,297 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 334 + 298 + 60 + 407 = $1,099 Mil.
|Accounts Receivable was $1,622 Mil.
Revenue was 2265 + 2353 + 2190 + 1988 = $8,796 Mil.
Gross Profit was 992 + 1001 + 891 + 795 = $3,679 Mil.
Total Current Assets was $6,640 Mil.
Total Assets was $12,851 Mil.
Property, Plant and Equipment(Net PPE) was $849 Mil.
Depreciation, Depletion and Amortization(DDA) was $379 Mil.
Selling, General & Admin. Expense(SGA) was $915 Mil.
Total Current Liabilities was $2,755 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)|
|=||(1991 / 9555)||/||(1622 / 8796)|
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)|
|=||(1016 / 8796)||/||(1018 / 9555)|
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 - (7043 + 882) / 13153)||/||(1 - (6640 + 849) / 12851)|
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))|
|=||(379 / (379 + 849))||/||(369 / (369 + 882))|
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)|
|=||(915 / 9555)||/||(915 / 8796)|
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)|
|=||((1547 + 3020) / 13153)||/||((1947 + 2755) / 12851)|
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|
|=||(1297 - 0||-||1099)||/||13153|
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 -2.19 signals that the company is likely to 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