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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 9 years, the highest Beneish M-Score of Broadcom Ltd was -2.14. 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 * 1.1019||+||0.528 * 0.8635||+||0.404 * 0.9872||+||0.892 * 1.3397||+||0.115 * 0.9759|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8011||+||4.679 * -0.087||-||0.327 * 0.7491|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $1,060 Mil.|
Revenue was 1771 + 1840 + 1735 + 1614 = $6,960 Mil.
Gross Profit was 941 + 997 + 884 + 846 = $3,668 Mil.
Total Current Assets was $3,971 Mil.
Total Assets was $10,777 Mil.
Property, Plant and Equipment(Net PPE) was $1,505 Mil.
Depreciation, Depletion and Amortization(DDA) was $980 Mil.
Selling, General & Admin. Expense(SGA) was $483 Mil.
Total Current Liabilities was $862 Mil.
Long-Term Debt was $3,892 Mil.
Net Income was 377 + 429 + 240 + 344 = $1,390 Mil.
Non Operating Income was 3 + 4 + 11 + -1 = $17 Mil.
Cash Flow from Operations was 474 + 582 + 592 + 663 = $2,311 Mil.
|Accounts Receivable was $718 Mil.
Revenue was 1635 + 1590 + 1269 + 701 = $5,195 Mil.
Gross Profit was 826 + 788 + 393 + 357 = $2,364 Mil.
Total Current Assets was $4,098 Mil.
Total Assets was $10,697 Mil.
Property, Plant and Equipment(Net PPE) was $1,269 Mil.
Depreciation, Depletion and Amortization(DDA) was $794 Mil.
Selling, General & Admin. Expense(SGA) was $450 Mil.
Total Current Liabilities was $845 Mil.
Long-Term Debt was $5,454 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)|
|=||(1060 / 6960)||/||(718 / 5195)|
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)|
|=||(997 / 5195)||/||(941 / 6960)|
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 - (3971 + 1505) / 10777)||/||(1 - (4098 + 1269) / 10697)|
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))|
|=||(794 / (794 + 1269))||/||(980 / (980 + 1505))|
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)|
|=||(483 / 6960)||/||(450 / 5195)|
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)|
|=||((3892 + 862) / 10777)||/||((5454 + 845) / 10697)|
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|
|=||(1390 - 17||-||2311)||/||10777|
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 -2.45 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
Broadcom Ltd Annual Data
Broadcom Ltd Quarterly Data