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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 8 years, the highest Beneish M-Score of Avago Technologies Ltd was -2.46. The lowest was -3.35. And the median was -2.70.
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 * 1.0862||+||0.528 * 1.0321||+||0.404 * 1.9667||+||0.892 * 2.1877||+||0.115 * 0.5581|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8699||+||4.679 * -0.1124||-||0.327 * 4.8245|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|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.
Net Income was 344 + 351 + 135 + -164 = $666 Mil.
Non Operating Income was -1 + 4 + 10 + -2 = $11 Mil.
Cash Flow from Operations was 663 + 481 + 381 + 314 = $1,839 Mil.
|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.
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)|
|=||(758 / 6108)||/||(319 / 2792)|
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)|
|=||(826 / 2792)||/||(846 / 6108)|
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 - (4076 + 1344) / 10532)||/||(1 - (2034 + 731) / 3671)|
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))|
|=||(222 / (222 + 731))||/||(963 / (963 + 1344))|
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)|
|=||(491 / 6108)||/||(258 / 2792)|
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)|
|=||((4852 + 906) / 10532)||/||((0 + 416) / 3671)|
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|
|=||(666 - 11||-||1839)||/||10532|
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 -2.74 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