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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 Group Inc 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 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 * 0.957||+||0.528 * 0.9486||+||0.404 * 0.9116||+||0.892 * 1.1827||+||0.115 * 0.9348|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8764||+||4.679 * -0.0036||-||0.327 * 0.91|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $820 Mil.|
Revenue was 1215.158 + 1263.387 + 1405.445 + 1429.071 = $5,313 Mil.
Gross Profit was 336.556 + 380.575 + 435.734 + 419.412 = $1,572 Mil.
Total Current Assets was $2,078 Mil.
Total Assets was $4,473 Mil.
Property, Plant and Equipment(Net PPE) was $326 Mil.
Depreciation, Depletion and Amortization(DDA) was $309 Mil.
Selling, General & Admin. Expense(SGA) was $412 Mil.
Total Current Liabilities was $1,078 Mil.
Long-Term Debt was $1,505 Mil.
Net Income was 19.126 + 192.76 + 54.626 + 39.024 = $306 Mil.
Non Operating Income was -8.792 + -20.225 + -9.412 + -8.99 = $-47 Mil.
Cash Flow from Operations was -63.263 + 122.19 + 81.935 + 228.163 = $369 Mil.
|Accounts Receivable was $724 Mil.
Revenue was 1225.017 + 1199.067 + 1067.824 + 1000.362 = $4,492 Mil.
Gross Profit was 346.774 + 366.371 + 316.895 + 230.957 = $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 $325 Mil.
Selling, General & Admin. Expense(SGA) was $397 Mil.
Total Current Liabilities was $1,080 Mil.
Long-Term Debt was $1,678 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)|
|=||(819.918 / 5313.061)||/||(724.43 / 4492.27)|
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)|
|=||(380.575 / 4492.27)||/||(336.556 / 5313.061)|
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 - (2077.969 + 325.727) / 4472.786)||/||(1 - (1751.582 + 388.653) / 4345.029)|
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))|
|=||(325.036 / (325.036 + 388.653))||/||(309.48 / (309.48 + 325.727))|
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)|
|=||(411.76 / 5313.061)||/||(397.258 / 4492.27)|
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)|
|=||((1505.073 + 1077.902) / 4472.786)||/||((1677.712 + 1079.627) / 4345.029)|
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|
|=||(305.536 - -47.419||-||369.025)||/||4472.786|
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 -2.39 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 Group Inc Annual Data
ARRIS Group Inc Quarterly Data