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ARRIS Group Inc (NAS:ARRS)
Beneish M-Score
-0.89 (As of Today)

Warning Sign:

Beneish M-Score -0.89 higher than -2.22, which implies that it might have manipulated its financial results.

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 -0.89 signals that the company is a manipulator.

ARRS' s 10-Year Beneish M-Score Range
Min: -4.28   Max: -0.89
Current: -0.89

-4.28
-0.89

During the past 13 years, the highest Beneish M-Score of ARRIS Group Inc was -0.89. The lowest was -4.28. And the median was -2.50.


Definition

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 * 1.096+0.528 * 1.1722+0.404 * 1.8601+0.892 * 3.1987+0.115 * 1.3457
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8405+4.679 * -0.1255-0.327 * 2.1481
=-0.89

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $736 Mil.
Revenue was 1225.017 + 1199.067 + 1067.823 + 1000.362 = $4,492 Mil.
Gross Profit was 346.774 + 366.371 + 316.992 + 231.077 = $1,261 Mil.
Total Current Assets was $1,752 Mil.
Total Assets was $4,345 Mil.
Property, Plant and Equipment(Net PPE) was $389 Mil.
Depreciation, Depletion and Amortization(DDA) was $242 Mil.
Selling, General & Admin. Expense(SGA) was $435 Mil.
Total Current Liabilities was $1,080 Mil.
Long-Term Debt was $1,678 Mil.
Net Income was 40.8 + -2.817 + 17.959 + -50.277 = $6 Mil.
Non Operating Income was -3.167 + -4.097 + 2.327 + 8.257 = $3 Mil.
Cash Flow from Operations was 34.848 + 190.86 + 28.11 + 293.952 = $548 Mil.
Accounts Receivable was $210 Mil.
Revenue was 353.65 + 344.003 + 357.432 + 349.327 = $1,404 Mil.
Gross Profit was 108.526 + 123.191 + 111.952 + 118.526 = $462 Mil.
Total Current Assets was $1,013 Mil.
Total Assets was $1,468 Mil.
Property, Plant and Equipment(Net PPE) was $54 Mil.
Depreciation, Depletion and Amortization(DDA) was $58 Mil.
Selling, General & Admin. Expense(SGA) was $162 Mil.
Total Current Liabilities was $434 Mil.
Long-Term Debt was $0 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(736.124 / 4492.269) / (209.979 / 1404.412)
=0.16386463 / 0.14951382
=1.096

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(366.371 / 1404.412) / (346.774 / 4492.269)
=0.32910214 / 0.28075211
=1.1722

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1751.582 + 388.653) / 4345.029) / (1 - (1013.118 + 54.109) / 1467.566)
=0.50742906 / 0.27279114
=1.8601

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=4492.269 / 1404.412
=3.1987

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))
=(57.785 / (57.785 + 54.109)) / (242.046 / (242.046 + 388.653))
=0.51642626 / 0.38377419
=1.3457

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)
=(435.306 / 4492.269) / (161.921 / 1404.412)
=0.09690114 / 0.11529451
=0.8405

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)
=((1677.712 + 1079.627) / 4345.029) / ((0 + 433.546) / 1467.566)
=0.63459622 / 0.2954184
=2.1481

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(5.665 - 3.32 - 547.77) / 4345.029
=-0.1255

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 -0.89 signals that the company is likely to be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

ARRIS Group Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.86191.07651.0731.30590.8310.94280.90061.21580.9425
GMI 0.97531.06420.99131.02430.80370.82221.07121.03421.1034
AQI 0.82950.83460.62022.62390.76430.88470.97151.03120.9497
SGI 1.12921.38851.31031.11291.15360.96790.98171.00111.2434
DEPI 1.17841.85591.17861.49640.34681.03830.98731.05360.9377
SGAI 0.68110.78080.89561.02921.24981.06480.94521.07920.8723
LVGI 0.80730.47672.44760.74911.00350.91210.86971.14650.9761
TATA -0.10460.0524-0.0030.0051-0.2366-0.1032-0.0387-0.096-0.0231
M-score -2.92-1.54-2.74-1.27-3.92-3.16-2.69-2.75-2.37

ARRIS Group Inc Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.21581.17541.05160.83480.94250.89172.18781.75431.29711.096
GMI 1.03420.99891.0421.0791.10341.14191.28551.22541.20961.1722
AQI 1.03121.07571.030.970.94970.83171.48661.6681.69011.8601
SGI 1.00111.0331.12481.20211.24341.24931.7022.14282.67493.1987
DEPI 1.05361.02481.00930.99350.93770.96612.24651.63061.70721.3457
SGAI 1.08261.0550.98610.92390.86950.8530.86120.87480.87190.8405
LVGI 1.14651.25451.20151.16750.97611.0312.4352.45572.44782.1481
TATA -0.096-0.1286-0.1286-0.1118-0.0231-0.0324-0.078-0.0879-0.1384-0.1255
M-score -2.75-2.95-2.95-2.99-2.37-2.49-1.08-1.17-1.34-0.89
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