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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 -3.38.
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 * 1.3595||+||0.528 * 1.0022||+||0.404 * 1.1244||+||0.892 * 1.1148||+||0.115 * 0.9522|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1542||+||4.679 * -0.0916||-||0.327 * 0.9343|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $33.8 Mil.|
Revenue was 108.183 + 107.796 + 102.81 + 100.172 = $419.0 Mil.
Gross Profit was 91.129 + 92.085 + 88.998 + 84.504 = $356.7 Mil.
Total Current Assets was $240.4 Mil.
Total Assets was $702.5 Mil.
Property, Plant and Equipment(Net PPE) was $20.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $46.9 Mil.
Selling, General & Admin. Expense(SGA) was $209.9 Mil.
Total Current Liabilities was $283.7 Mil.
Long-Term Debt was $221.5 Mil.
Net Income was 7.856 + 8.561 + 11.919 + 4.584 = $32.9 Mil.
Non Operating Income was -4.132 + -2.96 + -0.513 + 0.194 = $-7.4 Mil.
Cash Flow from Operations was 31.77 + 15.465 + 22.231 + 35.201 = $104.7 Mil.
|Accounts Receivable was $22.3 Mil.
Revenue was 92.346 + 88.009 + 93.546 + 101.902 = $375.8 Mil.
Gross Profit was 82.168 + 75.54 + 80.034 + 82.925 = $320.7 Mil.
Total Current Assets was $108.5 Mil.
Total Assets was $280.7 Mil.
Property, Plant and Equipment(Net PPE) was $15.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $30.3 Mil.
Selling, General & Admin. Expense(SGA) was $163.2 Mil.
Total Current Liabilities was $216.0 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)|
|=||(33.775 / 418.961)||/||(22.284 / 375.803)|
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)|
|=||(92.085 / 375.803)||/||(91.129 / 418.961)|
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 - (240.366 + 19.977) / 702.529)||/||(1 - (108.462 + 15.088) / 280.664)|
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))|
|=||(30.311 / (30.311 + 15.088))||/||(46.881 / (46.881 + 19.977))|
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)|
|=||(209.945 / 418.961)||/||(163.16 / 375.803)|
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)|
|=||((221.47 + 283.669) / 702.529)||/||((0 + 215.998) / 280.664)|
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|
|=||(32.92 - -7.411||-||104.667)||/||702.529|
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 -2.43 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
AVG Technologies NV Annual Data
AVG Technologies NV Quarterly Data