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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.
Avago Technologies Ltd has a M-score of -2.59 suggests that the company is not a manipulator.
During the past 7 years, the highest Beneish M-Score of Avago Technologies Ltd was -2.42. The lowest was -3.00. 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 Avago Technologies 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 * 0.9958||+||0.528 * 1.0029||+||0.404 * 1.1364||+||0.892 * 1.182||+||0.115 * 0.9665|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0752||+||4.679 * -0.0629||-||0.327 * 1.0373|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $319 Mil.|
Revenue was 701 + 709 + 738 + 644 = $2,792 Mil.
Gross Profit was 357 + 339 + 346 + 304 = $1,346 Mil.
Total Current Assets was $2,034 Mil.
Total Assets was $3,671 Mil.
Property, Plant and Equipment(Net PPE) was $731 Mil.
Depreciation, Depletion and Amortization(DDA) was $222 Mil.
Selling, General & Admin. Expense(SGA) was $258 Mil.
Total Current Liabilities was $416 Mil.
Long-Term Debt was $0 Mil.
Net Income was 158 + 134 + 172 + 142 = $606 Mil.
Non Operating Income was 0 + 0 + 6 + 5 = $11 Mil.
Cash Flow from Operations was 251 + 229 + 209 + 137 = $826 Mil.
|Accounts Receivable was $271 Mil.
Revenue was 562 + 576 + 618 + 606 = $2,362 Mil.
Gross Profit was 272 + 276 + 299 + 295 = $1,142 Mil.
Total Current Assets was $1,818 Mil.
Total Assets was $3,039 Mil.
Property, Plant and Equipment(Net PPE) was $561 Mil.
Depreciation, Depletion and Amortization(DDA) was $163 Mil.
Selling, General & Admin. Expense(SGA) was $203 Mil.
Total Current Liabilities was $330 Mil.
Long-Term Debt was $2 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)|
|=||(319 / 2792)||/||(271 / 2362)|
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)|
|=||(339 / 2362)||/||(357 / 2792)|
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 - (2034 + 731) / 3671)||/||(1 - (1818 + 561) / 3039)|
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))|
|=||(163 / (163 + 561))||/||(222 / (222 + 731))|
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)|
|=||(258 / 2792)||/||(203 / 2362)|
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 + 416) / 3671)||/||((2 + 330) / 3039)|
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|
|=||(606 - 11||-||826)||/||3671|
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.
Avago Technologies Ltd has a M-score of -2.59 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
Avago Technologies Ltd Annual Data
Avago Technologies Ltd Quarterly Data