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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.
ARRIS Group Inc has a M-score of -2.14 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of ARRIS Group Inc was -0.91. The lowest was -4.27. And the median was -2.51.
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 ARRIS Group 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 * 0.4655||+||0.528 * 0.9494||+||0.404 * 1.0523||+||0.892 * 2.3941||+||0.115 * 0.4812|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8408||+||4.679 * -0.0865||-||0.327 * 0.9196|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $738 Mil.|
Revenue was 1429.071 + 1225.017 + 1199.067 + 1067.823 = $4,921 Mil.
Gross Profit was 419.412 + 346.774 + 366.153 + 316.992 = $1,449 Mil.
Total Current Assets was $1,807 Mil.
Total Assets was $4,331 Mil.
Property, Plant and Equipment(Net PPE) was $377 Mil.
Depreciation, Depletion and Amortization(DDA) was $330 Mil.
Selling, General & Admin. Expense(SGA) was $422 Mil.
Total Current Liabilities was $1,179 Mil.
Long-Term Debt was $1,508 Mil.
Net Income was 39.024 + 40.8 + -4.38 + 17.959 = $93 Mil.
Non Operating Income was -8.99 + -3.167 + -4.098 + 2.327 = $-14 Mil.
Cash Flow from Operations was 220.308 + 34.848 + 190.797 + 36.04 = $482 Mil.
|Accounts Receivable was $662 Mil.
Revenue was 1000.362 + 353.65 + 344.003 + 357.432 = $2,055 Mil.
Gross Profit was 231.077 + 108.526 + 123.191 + 111.952 = $575 Mil.
Total Current Assets was $2,205 Mil.
Total Assets was $4,935 Mil.
Property, Plant and Equipment(Net PPE) was $404 Mil.
Depreciation, Depletion and Amortization(DDA) was $117 Mil.
Selling, General & Admin. Expense(SGA) was $210 Mil.
Total Current Liabilities was $1,492 Mil.
Long-Term Debt was $1,838 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)|
|=||(738.008 / 4920.978)||/||(662.156 / 2055.447)|
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)|
|=||(346.774 / 2055.447)||/||(419.412 / 4920.978)|
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 - (1806.6 + 376.509) / 4330.82)||/||(1 - (2205.165 + 404.157) / 4935.209)|
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))|
|=||(117.098 / (117.098 + 404.157))||/||(329.713 / (329.713 + 376.509))|
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)|
|=||(421.845 / 4920.978)||/||(209.56 / 2055.447)|
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)|
|=||((1507.796 + 1179.15) / 4330.82)||/||((1837.952 + 1491.798) / 4935.209)|
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|
|=||(93.403 - -13.928||-||481.993)||/||4330.82|
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.
ARRIS Group Inc has a M-score of -2.14 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
ARRIS Group Inc Annual Data
ARRIS Group Inc Quarterly Data