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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.
Avago Technologies Ltd has a M-score of -2.54 suggests that the company is not a manipulator.
During the past 7 years, the highest Beneish M-Score of Avago Technologies Ltd was -2.47. The lowest was -3.00. And the median was -2.58.
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 * 1.088||+||0.528 * 1.0161||+||0.404 * 1.1905||+||0.892 * 1.1161||+||0.115 * 1.0098|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0778||+||4.679 * -0.0625||-||0.327 * 1.0897|
|This Year (Jan14) TTM:||Last Year (Jan13) TTM:|
|Accounts Receivable was $323 Mil.|
Revenue was 709 + 738 + 644 + 562 = $2,653 Mil.
Gross Profit was 339 + 346 + 304 + 272 = $1,261 Mil.
Total Current Assets was $1,859 Mil.
Total Assets was $3,472 Mil.
Property, Plant and Equipment(Net PPE) was $684 Mil.
Depreciation, Depletion and Amortization(DDA) was $203 Mil.
Selling, General & Admin. Expense(SGA) was $243 Mil.
Total Current Liabilities was $364 Mil.
Long-Term Debt was $1 Mil.
Net Income was 134 + 172 + 142 + 113 = $561 Mil.
Non Operating Income was 0 + 6 + 5 + 1 = $12 Mil.
Cash Flow from Operations was 229 + 209 + 137 + 191 = $766 Mil.
|Accounts Receivable was $266 Mil.
Revenue was 576 + 618 + 606 + 577 = $2,377 Mil.
Gross Profit was 276 + 299 + 295 + 278 = $1,148 Mil.
Total Current Assets was $1,713 Mil.
Total Assets was $2,892 Mil.
Property, Plant and Equipment(Net PPE) was $529 Mil.
Depreciation, Depletion and Amortization(DDA) was $159 Mil.
Selling, General & Admin. Expense(SGA) was $202 Mil.
Total Current Liabilities was $277 Mil.
Long-Term Debt was $2 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)|
|=||(323 / 2653)||/||(266 / 2377)|
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)|
|=||(346 / 2377)||/||(339 / 2653)|
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 - (1859 + 684) / 3472)||/||(1 - (1713 + 529) / 2892)|
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))|
|=||(159 / (159 + 529))||/||(203 / (203 + 684))|
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)|
|=||(243 / 2653)||/||(202 / 2377)|
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)|
|=||((1 + 364) / 3472)||/||((2 + 277) / 2892)|
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|
|=||(561 - 12||-||766)||/||3472|
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 -2.54 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
Avago Technologies Ltd Annual Data
Avago Technologies Ltd Quarterly Data