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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 Amazon.com Inc was -0.01. The lowest was -4.36. And the median was -2.71.
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 Amazon.com 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 * 1.0178||+||0.528 * 0.905||+||0.404 * 0.9395||+||0.892 * 1.1718||+||0.115 * 0.9797|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0642||+||4.679 * -0.1696||-||0.327 * 1.0628|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $4,920 Mil.|
Revenue was 23185 + 22717 + 29329 + 20579 = $95,810 Mil.
Gross Profit was 8025 + 7322 + 8657 + 5952 = $29,956 Mil.
Total Current Assets was $26,391 Mil.
Total Assets was $52,440 Mil.
Property, Plant and Equipment(Net PPE) was $19,479 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,557 Mil.
Selling, General & Admin. Expense(SGA) was $18,196 Mil.
Total Current Liabilities was $23,912 Mil.
Long-Term Debt was $8,250 Mil.
Net Income was 92 + -57 + 214 + -437 = $-188 Mil.
Non Operating Income was 0 + -130 + -95 + -50 = $-275 Mil.
Cash Flow from Operations was 1997 + -1499 + 6715 + 1766 = $8,979 Mil.
|Accounts Receivable was $4,125 Mil.
Revenue was 19340 + 19741 + 25587 + 17092 = $81,760 Mil.
Gross Profit was 5941 + 5686 + 6781 + 4726 = $23,134 Mil.
Total Current Assets was $18,755 Mil.
Total Assets was $37,898 Mil.
Property, Plant and Equipment(Net PPE) was $14,089 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,915 Mil.
Selling, General & Admin. Expense(SGA) was $14,591 Mil.
Total Current Liabilities was $18,751 Mil.
Long-Term Debt was $3,119 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)|
|=||(4920 / 95810)||/||(4125 / 81760)|
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)|
|=||(7322 / 81760)||/||(8025 / 95810)|
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 - (26391 + 19479) / 52440)||/||(1 - (18755 + 14089) / 37898)|
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))|
|=||(3915 / (3915 + 14089))||/||(5557 / (5557 + 19479))|
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)|
|=||(18196 / 95810)||/||(14591 / 81760)|
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)|
|=||((8250 + 23912) / 52440)||/||((3119 + 18751) / 37898)|
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|
|=||(-188 - -275||-||8979)||/||52440|
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.
Amazon.com Inc has a M-score of -3.21 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
Amazon.com Inc Annual Data
Amazon.com Inc Quarterly Data