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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 -3.16. And the median was -2.57.
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 * 0.8152||+||0.528 * 0.8445||+||0.404 * 0.9651||+||0.892 * 1.5985||+||0.115 * 0.8825|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.747||+||4.679 * -0.0918||-||0.327 * 0.7677|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $1,019 Mil.|
Revenue was 1840 + 1735 + 1614 + 1635 = $6,824 Mil.
Gross Profit was 997 + 884 + 846 + 826 = $3,553 Mil.
Total Current Assets was $3,775 Mil.
Total Assets was $10,592 Mil.
Property, Plant and Equipment(Net PPE) was $1,460 Mil.
Depreciation, Depletion and Amortization(DDA) was $962 Mil.
Selling, General & Admin. Expense(SGA) was $486 Mil.
Total Current Liabilities was $1,119 Mil.
Long-Term Debt was $3,903 Mil.
Net Income was 429 + 240 + 344 + 351 = $1,364 Mil.
Non Operating Income was 4 + 11 + -1 + 4 = $18 Mil.
Cash Flow from Operations was 582 + 592 + 663 + 481 = $2,318 Mil.
|Accounts Receivable was $782 Mil.
Revenue was 1590 + 1269 + 701 + 709 = $4,269 Mil.
Gross Profit was 788 + 393 + 357 + 339 = $1,877 Mil.
Total Current Assets was $3,835 Mil.
Total Assets was $10,491 Mil.
Property, Plant and Equipment(Net PPE) was $1,158 Mil.
Depreciation, Depletion and Amortization(DDA) was $625 Mil.
Selling, General & Admin. Expense(SGA) was $407 Mil.
Total Current Liabilities was $1,016 Mil.
Long-Term Debt was $5,463 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)|
|=||(1019 / 6824)||/||(782 / 4269)|
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)|
|=||(884 / 4269)||/||(997 / 6824)|
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 - (3775 + 1460) / 10592)||/||(1 - (3835 + 1158) / 10491)|
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))|
|=||(625 / (625 + 1158))||/||(962 / (962 + 1460))|
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)|
|=||(486 / 6824)||/||(407 / 4269)|
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)|
|=||((3903 + 1119) / 10592)||/||((5463 + 1016) / 10491)|
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|
|=||(1364 - 18||-||2318)||/||10592|
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 -2.54 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