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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 -1.27. The lowest was -4.14. And the median was -2.67.
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 * 1.2081||+||0.528 * 1.0054||+||0.404 * 0.9766||+||0.892 * 0.9014||+||0.115 * 0.9393|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1269||+||4.679 * -0.0478||-||0.327 * 0.9817|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $652 Mil.|
Revenue was 1101.682 + 1221.416 + 1260.077 + 1215.158 = $4,798 Mil.
Gross Profit was 358.673 + 359.333 + 364.361 + 336.556 = $1,419 Mil.
Total Current Assets was $2,110 Mil.
Total Assets was $4,524 Mil.
Property, Plant and Equipment(Net PPE) was $312 Mil.
Depreciation, Depletion and Amortization(DDA) was $303 Mil.
Selling, General & Admin. Expense(SGA) was $417 Mil.
Total Current Liabilities was $1,013 Mil.
Long-Term Debt was $1,496 Mil.
Net Income was 30.041 + 26.257 + 16.758 + 19.126 = $92 Mil.
Non Operating Income was -19.404 + -11.462 + 4.315 + -8.792 = $-35 Mil.
Cash Flow from Operations was 119.374 + 215.905 + 71.856 + -63.263 = $344 Mil.
|Accounts Receivable was $599 Mil.
Revenue was 1263.387 + 1405.445 + 1429.071 + 1225.017 = $5,323 Mil.
Gross Profit was 380.575 + 435.734 + 419.412 + 346.774 = $1,582 Mil.
Total Current Assets was $1,910 Mil.
Total Assets was $4,341 Mil.
Property, Plant and Equipment(Net PPE) was $366 Mil.
Depreciation, Depletion and Amortization(DDA) was $316 Mil.
Selling, General & Admin. Expense(SGA) was $411 Mil.
Total Current Liabilities was $1,004 Mil.
Long-Term Debt was $1,449 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)|
|=||(651.893 / 4798.333)||/||(598.603 / 5322.92)|
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)|
|=||(359.333 / 5322.92)||/||(358.673 / 4798.333)|
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 - (2110.203 + 312.311) / 4523.516)||/||(1 - (1910.113 + 366.431) / 4341.042)|
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))|
|=||(315.739 / (315.739 + 366.431))||/||(303.37 / (303.37 + 312.311))|
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)|
|=||(417.084 / 4798.333)||/||(410.568 / 5322.92)|
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)|
|=||((1496.243 + 1012.63) / 4523.516)||/||((1448.96 + 1003.677) / 4341.042)|
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|
|=||(92.182 - -35.343||-||343.872)||/||4523.516|
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 -2.63 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