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Broadcom Ltd (NAS:AVGO)
Beneish M-Score
-2.45 (As of Today)

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.

Broadcom Ltd has a M-score of -2.45 suggests that the company is not a manipulator.

AVGO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Max: -2.14
Current: -2.45

-3.35
-2.14

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.


Definition

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
=-2.45

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

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

Measured as the ratio of days’ sales in receivables in year t to year t-1.

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)
=0.15229885 / 0.13820982
=1.1019

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(997 / 5195) / (941 / 6960)
=0.45505294 / 0.52701149
=0.8635

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

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)
=0.49188086 / 0.49827054
=0.9872

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=6960 / 5195
=1.3397

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))
=0.38487639 / 0.3943662
=0.9759

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)
=0.06939655 / 0.08662175
=0.8011

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)
=0.44112462 / 0.58885669
=0.7491

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(1390 - 17 - 2311) / 10777
=-0.087

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.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Broadcom Ltd Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15
DSRI 1.15731.08641.03121.02731.14991.10430.8152
GMI 1.02160.81760.941.01641.01621.08120.8445
AQI 0.83910.85580.82370.77461.17431.91210.9651
SGI 0.87351.41041.11611.0121.0661.6941.5985
DEPI 0.921.04431.08871.40911.06820.62910.8825
SGAI 1.30260.62321.00570.89381.04651.08220.747
LVGI 0.79390.60010.54860.84020.9975.09430.7677
TATA -0.0893-0.032-0.063-0.0454-0.0539-0.0877-0.0918
M-score -2.91-2.14-2.59-2.62-2.46-3.16-2.54

Broadcom Ltd Quarterly Data

Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16
DSRI 1.14991.0880.99581.13531.10431.13521.08620.71270.81521.1019
GMI 1.01621.01611.00291.1421.08121.04451.03210.82560.84450.8635
AQI 1.17431.19051.13641.78991.91211.86221.96671.03140.96510.9872
SGI 1.0661.11611.1821.42381.6941.95822.18771.92391.59851.3397
DEPI 1.06821.00980.96650.71680.62910.59460.55810.73120.88250.9759
SGAI 1.04651.07781.07521.12511.08220.94570.86990.76430.7470.8011
LVGI 0.9971.08971.03735.25455.09435.60144.82450.77990.76770.7491
TATA -0.0539-0.0625-0.0637-0.0692-0.0877-0.0897-0.1124-0.1072-0.0918-0.087
M-score -2.46-2.54-2.59-3.35-3.16-3.09-2.74-2.42-2.54-2.45
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