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Aruba Networks Inc (NAS:ARUN)
Beneish M-Score
-3.43 (As of Today)

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.

Aruba Networks Inc has a M-score of -3.43 suggests that the company is not a manipulator.

ARUN' s 10-Year Beneish M-Score Range
Min: -3.61   Max: -1.3
Current: -3.43

-3.61
-1.3

During the past 13 years, the highest Beneish M-Score of Aruba Networks Inc was -1.30. The lowest was -3.61. And the median was -3.43.


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 Aruba Networks 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 * 0.9033+0.528 * 1.0206+0.404 * 1.1702+0.892 * 1.2148+0.115 * 0.8901
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.978+4.679 * -0.2247-0.327 * 1.2352
=-3.43

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

This Year (Jul14) TTM:Last Year (Jul13) TTM:
Accounts Receivable was $102.3 Mil.
Revenue was 202.862 + 188.788 + 176.356 + 160.927 = $728.9 Mil.
Gross Profit was 139.879 + 128.894 + 123.003 + 112.376 = $504.2 Mil.
Total Current Assets was $483.5 Mil.
Total Assets was $629.7 Mil.
Property, Plant and Equipment(Net PPE) was $27.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.5 Mil.
Selling, General & Admin. Expense(SGA) was $334.8 Mil.
Total Current Liabilities was $239.5 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -4.086 + -6.351 + -10.701 + -7.827 = $-29.0 Mil.
Non Operating Income was -0.165 + -0.198 + -0.08 + 0.27 = $-0.2 Mil.
Cash Flow from Operations was 30.725 + 27.364 + 33.355 + 21.248 = $112.7 Mil.
Accounts Receivable was $93.2 Mil.
Revenue was 153.064 + 147.136 + 155.362 + 144.482 = $600.0 Mil.
Gross Profit was 107.331 + 103.164 + 110.706 + 102.364 = $423.6 Mil.
Total Current Assets was $598.7 Mil.
Total Assets was $746.7 Mil.
Property, Plant and Equipment(Net PPE) was $27.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.7 Mil.
Selling, General & Admin. Expense(SGA) was $281.8 Mil.
Total Current Liabilities was $230.0 Mil.
Long-Term Debt was $0.0 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)
=(102.256 / 728.933) / (93.191 / 600.044)
=0.14028175 / 0.15530694
=0.9033

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)
=(128.894 / 600.044) / (139.879 / 728.933)
=0.7058899 / 0.69163009
=1.0206

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 - (483.505 + 27.261) / 629.66) / (1 - (598.71 + 27.536) / 746.743)
=0.18882254 / 0.16136341
=1.1702

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
=728.933 / 600.044
=1.2148

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))
=(23.701 / (23.701 + 27.536)) / (29.495 / (29.495 + 27.261))
=0.46257587 / 0.51968074
=0.8901

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)
=(334.839 / 728.933) / (281.835 / 600.044)
=0.45935498 / 0.46969056
=0.978

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)
=((0 + 239.501) / 629.66) / ((0 + 229.95) / 746.743)
=0.38036559 / 0.30793727
=1.2352

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
=(-28.965 - -0.173 - 112.692) / 629.66
=-0.2247

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.

Aruba Networks Inc has a M-score of -3.43 suggests that the company will not 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.

Aruba Networks Inc Annual Data

Jul05Jul06Jul07Jul08Jul09Jul10Jul11Jul12Jul13Jul14
DSRI 0.25061.01460.98530.91620.92191.11730.8971.00080.9033
GMI 0.4190.89080.9711.03040.97410.98050.97681.00151.0206
AQI 0.550.55584.46540.76480.64522.12731.14180.90621.1702
SGI 6.02031.75851.39811.11781.33761.48771.30331.16111.2148
DEPI 1.01311.25290.79840.77721.12240.99951.02961.05940.8901
SGAI 0.25431.06940.99320.97820.92490.92760.97120.99010.978
LVGI 1.29980.19131.20091.04851.25910.74160.92741.26861.2352
TATA 0.0598-0.0708-0.1344-0.2132-0.23590.0203-0.1901-0.2484-0.2247
M-score 1.13-2.08-1.47-3.57-3.57-1.30-3.12-3.61-3.43

Aruba Networks Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
DSRI 0.90780.8970.86710.82520.71221.00080.82171.04921.15860.9033
GMI 0.98530.97680.97070.97940.9871.00151.01011.01381.0211.0206
AQI 1.28421.14180.93420.70240.69520.90621.13541.25381.36081.1702
SGI 1.36441.30331.25231.22761.19331.16111.13761.11651.15851.2148
DEPI 1.02261.02961.03361.04091.12631.05940.99180.92060.89060.8901
SGAI 0.97710.97120.9680.94710.96270.99011.01461.05341.02920.978
LVGI 0.73760.92741.00011.03231.07371.26861.31091.56671.57971.2352
TATA -0.049-0.1901-0.2115-0.2065-0.2311-0.2484-0.2766-0.2977-0.2642-0.2247
M-score -2.27-3.12-3.40-3.53-3.79-3.61-3.86-3.82-3.48-3.43
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