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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 6.36. The lowest was -3.71. And the median was -2.75.
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 * 1.1606||+||0.528 * 0.9415||+||0.404 * 0.9167||+||0.892 * 1.2708||+||0.115 * 1.0246|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0518||+||4.679 * -0.1698||-||0.327 * 0.9535|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $8,339 Mil.|
Revenue was 43741 + 32714 + 30404 + 29128 = $135,987 Mil.
Gross Profit was 14782 + 11454 + 11224 + 10262 = $47,722 Mil.
Total Current Assets was $45,781 Mil.
Total Assets was $83,402 Mil.
Property, Plant and Equipment(Net PPE) was $29,114 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,117 Mil.
Selling, General & Admin. Expense(SGA) was $27,285 Mil.
Total Current Liabilities was $43,816 Mil.
Long-Term Debt was $15,213 Mil.
Net Income was 749 + 252 + 857 + 513 = $2,371 Mil.
Non Operating Income was 15 + 8 + -14 + 81 = $90 Mil.
Cash Flow from Operations was 10652 + 4486 + 3465 + -2160 = $16,443 Mil.
|Accounts Receivable was $5,654 Mil.
Revenue was 35747 + 25358 + 23185 + 22717 = $107,007 Mil.
Gross Profit was 11406 + 8603 + 8025 + 7322 = $35,356 Mil.
Total Current Assets was $35,705 Mil.
Total Assets was $64,747 Mil.
Property, Plant and Equipment(Net PPE) was $21,838 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,281 Mil.
Selling, General & Admin. Expense(SGA) was $20,412 Mil.
Total Current Liabilities was $33,887 Mil.
Long-Term Debt was $14,175 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)|
|=||(8339 / 135987)||/||(5654 / 107007)|
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)|
|=||(35356 / 107007)||/||(47722 / 135987)|
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 - (45781 + 29114) / 83402)||/||(1 - (35705 + 21838) / 64747)|
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))|
|=||(6281 / (6281 + 21838))||/||(8117 / (8117 + 29114))|
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)|
|=||(27285 / 135987)||/||(20412 / 107007)|
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)|
|=||((15213 + 43816) / 83402)||/||((14175 + 33887) / 64747)|
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|
|=||(2371 - 90||-||16443)||/||83402|
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 -2.94 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