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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 Aruba Networks Inc was 3.22. The lowest was -4.13. And the median was -3.40.
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 * 1.0899||+||0.528 * 1.0005||+||0.404 * 0.9265||+||0.892 * 1.2744||+||0.115 * 1.008|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8893||+||4.679 * -0.2556||-||0.327 * 1.1241|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $114.1 Mil.|
Revenue was 212.931 + 207.821 + 202.862 + 188.788 = $812.4 Mil.
Gross Profit was 152.575 + 146.582 + 139.879 + 128.894 = $567.9 Mil.
Total Current Assets was $494.7 Mil.
Total Assets was $641.9 Mil.
Property, Plant and Equipment(Net PPE) was $30.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.5 Mil.
Selling, General & Admin. Expense(SGA) was $348.8 Mil.
Total Current Liabilities was $268.3 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 5.683 + 2.743 + -4.086 + -6.351 = $-2.0 Mil.
Non Operating Income was -1.266 + -0.752 + -0.165 + -0.198 = $-2.4 Mil.
Cash Flow from Operations was 59.817 + 46.555 + 30.725 + 27.364 = $164.5 Mil.
|Accounts Receivable was $82.2 Mil.
Revenue was 176.356 + 160.927 + 153.064 + 147.136 = $637.5 Mil.
Gross Profit was 123.003 + 112.376 + 107.331 + 103.164 = $445.9 Mil.
Total Current Assets was $456.1 Mil.
Total Assets was $601.7 Mil.
Property, Plant and Equipment(Net PPE) was $27.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $27.1 Mil.
Selling, General & Admin. Expense(SGA) was $307.8 Mil.
Total Current Liabilities was $223.8 Mil.
Long-Term Debt was $0.0 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)|
|=||(114.109 / 812.402)||/||(82.152 / 637.483)|
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)|
|=||(146.582 / 637.483)||/||(152.575 / 812.402)|
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 - (494.705 + 30.36) / 641.863)||/||(1 - (456.1 + 27.432) / 601.703)|
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))|
|=||(27.092 / (27.092 + 27.432))||/||(29.512 / (29.512 + 30.36))|
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)|
|=||(348.787 / 812.402)||/||(307.764 / 637.483)|
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 + 268.346) / 641.863)||/||((0 + 223.791) / 601.703)|
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|
|=||(-2.011 - -2.381||-||164.461)||/||641.863|
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 -3.40 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
Aruba Networks Inc Annual Data
Aruba Networks Inc Quarterly Data