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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 -1.04. The lowest was -4.14. And the median was -2.53.
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 * 1.4652||+||0.528 * 1.1826||+||0.404 * 1.1447||+||0.892 * 1.4232||+||0.115 * 0.8445|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7651||+||4.679 * -0.0429||-||0.327 * 0.9329|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $1,359 Mil.|
Revenue was 1759.223 + 1725.145 + 1730.044 + 1614.706 = $6,829 Mil.
Gross Profit was 436 + 442.85 + 444.734 + 384.032 = $1,708 Mil.
Total Current Assets was $3,280 Mil.
Total Assets was $7,758 Mil.
Property, Plant and Equipment(Net PPE) was $353 Mil.
Depreciation, Depletion and Amortization(DDA) was $495 Mil.
Selling, General & Admin. Expense(SGA) was $454 Mil.
Total Current Liabilities was $1,834 Mil.
Long-Term Debt was $2,180 Mil.
Net Income was 88.283 + 48.162 + 84.228 + -202.573 = $18 Mil.
Non Operating Income was 21.964 + -17.51 + -1.807 + -13.85 = $-11 Mil.
Cash Flow from Operations was 35.299 + 288.967 + 260.764 + -222.535 = $362 Mil.
|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.
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)|
|=||(1359.43 / 6829.118)||/||(651.893 / 4798.333)|
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)|
|=||(1418.923 / 4798.333)||/||(1707.616 / 6829.118)|
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 - (3280.072 + 353.377) / 7758.362)||/||(1 - (2110.203 + 312.311) / 4523.516)|
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))|
|=||(303.37 / (303.37 + 312.311))||/||(495.052 / (495.052 + 353.377))|
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)|
|=||(454.189 / 6829.118)||/||(417.084 / 4798.333)|
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)|
|=||((2180.009 + 1834.134) / 7758.362)||/||((1496.243 + 1012.63) / 4523.516)|
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|
|=||(18.1 - -11.203||-||362.495)||/||7758.362|
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 -1.68 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 International PLC Annual Data
ARRIS International PLC Quarterly Data