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Beneish M-Score -1.21 higher than -2.22, which implies that it might have manipulated its financial results.
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 -1.19. 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 * 1.6194||+||0.528 * 1.168||+||0.404 * 1.5215||+||0.892 * 1.6647||+||0.115 * 0.8143|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.846||+||4.679 * -0.0653||-||0.327 * 0.6645|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $2,181 Mil.|
Revenue was 3792 + 3541 + 1771 + 1840 = $10,944 Mil.
Gross Profit was 1782 + 1046 + 941 + 997 = $4,766 Mil.
Total Current Assets was $6,048 Mil.
Total Assets was $49,752 Mil.
Property, Plant and Equipment(Net PPE) was $2,573 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,592 Mil.
Selling, General & Admin. Expense(SGA) was $700 Mil.
Total Current Liabilities was $2,728 Mil.
Long-Term Debt was $13,381 Mil.
Net Income was -298 + -1186 + 377 + 429 = $-678 Mil.
Non Operating Income was -17 + -59 + 3 + 4 = $-69 Mil.
Cash Flow from Operations was 963 + 622 + 474 + 582 = $2,641 Mil.
|Accounts Receivable was $809 Mil.
Revenue was 1735 + 1614 + 1635 + 1590 = $6,574 Mil.
Gross Profit was 884 + 846 + 826 + 788 = $3,344 Mil.
Total Current Assets was $3,169 Mil.
Total Assets was $9,988 Mil.
Property, Plant and Equipment(Net PPE) was $1,392 Mil.
Depreciation, Depletion and Amortization(DDA) was $962 Mil.
Selling, General & Admin. Expense(SGA) was $497 Mil.
Total Current Liabilities was $952 Mil.
Long-Term Debt was $3,915 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)|
|=||(2181 / 10944)||/||(809 / 6574)|
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)|
|=||(3344 / 6574)||/||(4766 / 10944)|
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 - (6048 + 2573) / 49752)||/||(1 - (3169 + 1392) / 9988)|
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))|
|=||(962 / (962 + 1392))||/||(2592 / (2592 + 2573))|
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)|
|=||(700 / 10944)||/||(497 / 6574)|
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)|
|=||((13381 + 2728) / 49752)||/||((3915 + 952) / 9988)|
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|
|=||(-678 - -69||-||2641)||/||49752|
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 -1.21 signals that the company is likely to 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