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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 -1.20. The lowest was -3.71. And the median was -2.76.
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 * 0.985||+||0.528 * 0.9235||+||0.404 * 0.9981||+||0.892 * 1.1952||+||0.115 * 1.0477|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0843||+||4.679 * -0.1278||-||0.327 * 1.0617|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $5,612 Mil.|
Revenue was 29329 + 20579 + 19340 + 19741 = $88,989 Mil.
Gross Profit was 8657 + 5952 + 5941 + 5686 = $26,236 Mil.
Total Current Assets was $31,327 Mil.
Total Assets was $54,505 Mil.
Property, Plant and Equipment(Net PPE) was $16,967 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,746 Mil.
Selling, General & Admin. Expense(SGA) was $16,650 Mil.
Total Current Liabilities was $28,089 Mil.
Long-Term Debt was $12,489 Mil.
Net Income was 214 + -437 + -126 + 108 = $-241 Mil.
Non Operating Income was -95 + -50 + 22 + 5 = $-118 Mil.
Cash Flow from Operations was 6715 + 1766 + 862 + -2502 = $6,841 Mil.
|Accounts Receivable was $4,767 Mil.
Revenue was 25587 + 17092 + 15704 + 16070 = $74,453 Mil.
Gross Profit was 6781 + 4726 + 4495 + 4269 = $20,271 Mil.
Total Current Assets was $24,625 Mil.
Total Assets was $40,159 Mil.
Property, Plant and Equipment(Net PPE) was $10,949 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,252 Mil.
Selling, General & Admin. Expense(SGA) was $12,847 Mil.
Total Current Liabilities was $22,980 Mil.
Long-Term Debt was $5,181 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)|
|=||(5612 / 88989)||/||(4767 / 74453)|
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)|
|=||(5952 / 74453)||/||(8657 / 88989)|
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 - (31327 + 16967) / 54505)||/||(1 - (24625 + 10949) / 40159)|
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))|
|=||(3252 / (3252 + 10949))||/||(4746 / (4746 + 16967))|
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)|
|=||(16650 / 88989)||/||(12847 / 74453)|
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)|
|=||((12489 + 28089) / 54505)||/||((5181 + 22980) / 40159)|
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|
|=||(-241 - -118||-||6841)||/||54505|
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 -2.99 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