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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 ARRIS International PLC was -0.89. The lowest was -4.27. 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 ARRIS International PLC 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 * 0.976||+||0.528 * 1.0267||+||0.404 * 0.9493||+||0.892 * 0.9432||+||0.115 * 0.9556|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0085||+||4.679 * -0.0141||-||0.327 * 0.9303|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $648 Mil.|
Revenue was 1221.416 + 1260.077 + 1215.158 + 1263.387 = $4,960 Mil.
Gross Profit was 359.333 + 364.361 + 336.556 + 380.575 = $1,441 Mil.
Total Current Assets was $2,118 Mil.
Total Assets was $4,513 Mil.
Property, Plant and Equipment(Net PPE) was $319 Mil.
Depreciation, Depletion and Amortization(DDA) was $304 Mil.
Selling, General & Admin. Expense(SGA) was $405 Mil.
Total Current Liabilities was $1,019 Mil.
Long-Term Debt was $1,525 Mil.
Net Income was 26.257 + 16.758 + 19.126 + 192.76 = $255 Mil.
Non Operating Income was -11.462 + 4.315 + -8.792 + -20.225 = $-36 Mil.
Cash Flow from Operations was 215.905 + 71.856 + -63.263 + 130.045 = $355 Mil.
|Accounts Receivable was $704 Mil.
Revenue was 1405.445 + 1429.071 + 1225.017 + 1199.067 = $5,259 Mil.
Gross Profit was 435.734 + 419.412 + 346.774 + 366.371 = $1,568 Mil.
Total Current Assets was $1,848 Mil.
Total Assets was $4,305 Mil.
Property, Plant and Equipment(Net PPE) was $371 Mil.
Depreciation, Depletion and Amortization(DDA) was $324 Mil.
Selling, General & Admin. Expense(SGA) was $426 Mil.
Total Current Liabilities was $1,122 Mil.
Long-Term Debt was $1,488 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)|
|=||(647.726 / 4960.038)||/||(703.566 / 5258.6)|
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)|
|=||(364.361 / 5258.6)||/||(359.333 / 4960.038)|
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 - (2118.442 + 319.443) / 4513.24)||/||(1 - (1848.388 + 371.496) / 4305.244)|
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))|
|=||(324.063 / (324.063 + 371.496))||/||(303.918 / (303.918 + 319.443))|
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)|
|=||(404.795 / 4960.038)||/||(425.552 / 5258.6)|
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)|
|=||((1525.454 + 1019.331) / 4513.24)||/||((1487.585 + 1121.934) / 4305.244)|
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|
|=||(254.901 - -36.164||-||354.543)||/||4513.24|
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 International PLC has a M-score of -2.61 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
ARRIS International PLC Annual Data
ARRIS International PLC Quarterly Data