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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.
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.
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|
|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
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)|
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)|
|=||(366.371 / 1404.412)||/||(346.774 / 4492.269)|
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 - (1751.582 + 388.653) / 4345.029)||/||(1 - (1013.118 + 54.109) / 1467.566)|
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))|
|=||(57.785 / (57.785 + 54.109))||/||(242.046 / (242.046 + 388.653))|
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)|
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)|
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|
|=||(5.665 - 3.32||-||547.77)||/||4345.029|
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.
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