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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 6 years, the highest Beneish M-Score of AVG Technologies NV was -2.11. The lowest was -3.87. And the median was -3.64.
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 AVG Technologies NV 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 * 1.6286||+||0.528 * 0.9629||+||0.404 * 1.1562||+||0.892 * 1.051||+||0.115 * 0.9665|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1625||+||4.679 * -0.0632||-||0.327 * 0.912|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $37.5 Mil.|
Revenue was 107.796 + 102.81 + 100.172 + 92.346 = $403.1 Mil.
Gross Profit was 92.085 + 88.998 + 84.504 + 82.168 = $347.8 Mil.
Total Current Assets was $213.0 Mil.
Total Assets was $686.0 Mil.
Property, Plant and Equipment(Net PPE) was $17.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $42.4 Mil.
Selling, General & Admin. Expense(SGA) was $199.3 Mil.
Total Current Liabilities was $260.2 Mil.
Long-Term Debt was $221.9 Mil.
Net Income was 8.561 + 11.919 + 4.584 + 18.214 = $43.3 Mil.
Non Operating Income was -2.96 + -0.513 + -0.313 + -1.059 = $-4.8 Mil.
Cash Flow from Operations was 15.465 + 22.231 + 35.201 + 18.601 = $91.5 Mil.
|Accounts Receivable was $21.9 Mil.
Revenue was 88.009 + 93.546 + 101.902 + 100.104 = $383.6 Mil.
Gross Profit was 75.54 + 80.034 + 82.925 + 80.099 = $318.6 Mil.
Total Current Assets was $108.0 Mil.
Total Assets was $286.6 Mil.
Property, Plant and Equipment(Net PPE) was $14.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $30.2 Mil.
Selling, General & Admin. Expense(SGA) was $163.1 Mil.
Total Current Liabilities was $220.8 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)|
|=||(37.531 / 403.124)||/||(21.927 / 383.561)|
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)|
|=||(88.998 / 383.561)||/||(92.085 / 403.124)|
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 - (213.044 + 17.833) / 686.041)||/||(1 - (107.994 + 14.162) / 286.639)|
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))|
|=||(30.162 / (30.162 + 14.162))||/||(42.431 / (42.431 + 17.833))|
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)|
|=||(199.285 / 403.124)||/||(163.11 / 383.561)|
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)|
|=||((221.851 + 260.157) / 686.041)||/||((0 + 220.833) / 286.639)|
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|
|=||(43.278 - -4.845||-||91.498)||/||686.041|
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.
AVG Technologies NV has a M-score of -2.11 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
AVG Technologies NV Annual Data
AVG Technologies NV Quarterly Data