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Beneish M-Score -1.19 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.
During the past 9 years, the highest Beneish M-Score of Broadcom Ltd was -1.19. The lowest was -3.35. And the median was -2.59.
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 Broadcom Ltd 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 * 1.6838||+||0.528 * 1.0732||+||0.404 * 1.6926||+||0.892 * 1.455||+||0.115 * 0.9972|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8581||+||4.679 * -0.0461||-||0.327 * 0.6161|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $1,857 Mil.|
Revenue was 3541 + 1771 + 1840 + 1735 = $8,887 Mil.
Gross Profit was 1046 + 941 + 997 + 884 = $3,868 Mil.
Total Current Assets was $6,687 Mil.
Total Assets was $51,407 Mil.
Property, Plant and Equipment(Net PPE) was $2,486 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,790 Mil.
Selling, General & Admin. Expense(SGA) was $613 Mil.
Total Current Liabilities was $2,651 Mil.
Long-Term Debt was $14,664 Mil.
Net Income was -1186 + 377 + 429 + 240 = $-140 Mil.
Non Operating Income was -59 + 3 + 4 + 11 = $-41 Mil.
Cash Flow from Operations was 622 + 474 + 582 + 592 = $2,270 Mil.
|Accounts Receivable was $758 Mil.
Revenue was 1614 + 1635 + 1590 + 1269 = $6,108 Mil.
Gross Profit was 846 + 826 + 788 + 393 = $2,853 Mil.
Total Current Assets was $4,076 Mil.
Total Assets was $10,532 Mil.
Property, Plant and Equipment(Net PPE) was $1,344 Mil.
Depreciation, Depletion and Amortization(DDA) was $963 Mil.
Selling, General & Admin. Expense(SGA) was $491 Mil.
Total Current Liabilities was $906 Mil.
Long-Term Debt was $4,852 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)|
|=||(1857 / 8887)||/||(758 / 6108)|
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)|
|=||(2853 / 6108)||/||(3868 / 8887)|
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 - (6687 + 2486) / 51407)||/||(1 - (4076 + 1344) / 10532)|
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))|
|=||(963 / (963 + 1344))||/||(1790 / (1790 + 2486))|
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)|
|=||(613 / 8887)||/||(491 / 6108)|
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)|
|=||((14664 + 2651) / 51407)||/||((4852 + 906) / 10532)|
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|
|=||(-140 - -41||-||2270)||/||51407|
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.
Broadcom Ltd has a M-score of -1.19 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
Broadcom Ltd Annual Data
Broadcom Ltd Quarterly Data