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Brocade Communications Systems Inc (NAS:BRCD)
Beneish M-Score
-2.95 (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.

Brocade Communications Systems Inc has a M-score of -2.95 suggests that the company is not a manipulator.

BRCD' s 10-Year Beneish M-Score Range
Min: -3.98   Max: -1.02
Current: -2.95

-3.98
-1.02

During the past 13 years, the highest Beneish M-Score of Brocade Communications Systems Inc was -1.02. The lowest was -3.98. And the median was -2.88.


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 Brocade Communications Systems Inc 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 * 0.9058+0.528 * 0.9562+0.404 * 0.9163+0.892 * 0.9948+0.115 * 1.5203
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.001+4.679 * -0.0813-0.327 * 0.9916
=-2.95

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

This Year (Oct14) TTM:Last Year (Oct13) TTM:
Accounts Receivable was $225 Mil.
Revenue was 564.358 + 545.464 + 536.91 + 564.535 = $2,211 Mil.
Gross Profit was 377.118 + 361.713 + 354.292 + 372.67 = $1,466 Mil.
Total Current Assets was $1,658 Mil.
Total Assets was $3,734 Mil.
Property, Plant and Equipment(Net PPE) was $445 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $639 Mil.
Total Current Liabilities was $587 Mil.
Long-Term Debt was $595 Mil.
Net Income was 83.419 + 87.352 + -13.684 + 80.884 = $238 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 157.853 + 106.031 + 168.244 + 109.469 = $542 Mil.
Accounts Receivable was $250 Mil.
Revenue was 558.8 + 536.551 + 538.784 + 588.729 = $2,223 Mil.
Gross Profit was 362.64 + 338.202 + 334.112 + 373.925 = $1,409 Mil.
Total Current Assets was $1,423 Mil.
Total Assets was $3,621 Mil.
Property, Plant and Equipment(Net PPE) was $473 Mil.
Depreciation, Depletion and Amortization(DDA) was $184 Mil.
Selling, General & Admin. Expense(SGA) was $642 Mil.
Total Current Liabilities was $561 Mil.
Long-Term Debt was $596 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)
=(224.913 / 2211.267) / (249.598 / 2222.864)
=0.10171228 / 0.11228667
=0.9058

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)
=(361.713 / 2222.864) / (377.118 / 2211.267)
=0.6338125 / 0.66287472
=0.9562

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 - (1658.005 + 445.433) / 3733.675) / (1 - (1422.803 + 472.94) / 3621.391)
=0.43663067 / 0.47651524
=0.9163

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
=2211.267 / 2222.864
=0.9948

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))
=(184.114 / (184.114 + 472.94)) / (100.647 / (100.647 + 445.433))
=0.28021137 / 0.18430816
=1.5203

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)
=(639.456 / 2211.267) / (642.155 / 2222.864)
=0.28918082 / 0.28888632
=1.001

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)
=((595.45 + 587.308) / 3733.675) / ((596.208 + 560.663) / 3621.391)
=0.31678119 / 0.31945487
=0.9916

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
=(237.971 - 0 - 541.597) / 3733.675
=-0.0813

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.

Brocade Communications Systems Inc has a M-score of -2.95 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.

Brocade Communications Systems Inc Annual Data

Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14
DSRI 0.76021.07361.0840.76251.40751.03190.73730.8981.07780.9058
GMI 0.99930.9481.10970.91171.10830.89790.9860.96710.97510.9562
AQI 0.40511.0963.66491.46931.02870.96210.98470.88180.8950.9163
SGI 0.96291.30741.64781.1861.33131.07241.02531.04210.99330.9948
DEPI 1.03181.18680.77541.19770.9011.13840.96741.03350.96461.5203
SGAI 1.04391.0321.08331.49890.68581.13651.09840.96660.94641.001
LVGI 0.88170.60721.01821.90880.82690.85370.93920.89250.94580.9916
TATA -0.0673-0.09-0.0561-0.0775-0.0503-0.0449-0.1145-0.1105-0.0879-0.0813
M-score -3.25-2.40-1.00-3.11-1.88-2.63-3.25-3.07-2.86-2.95

Brocade Communications Systems Inc Quarterly Data

Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14
DSRI 0.75940.89870.94341.04810.93141.07781.03790.83360.89260.9058
GMI 1.05160.96760.97060.97870.97360.97510.97350.95890.95350.9562
AQI 0.96850.88180.83940.91150.90620.8950.95930.85340.87090.9163
SGI 1.02831.04121.04711.04811.01470.99330.97030.97150.98360.9948
DEPI 1.02661.03351.02091.00490.98360.96460.99551.09451.26441.5203
SGAI 0.84560.96740.95760.93640.96370.94640.94990.9590.96011.001
LVGI 0.93720.89251.07350.95140.92780.94580.80350.94860.97840.9916
TATA -0.1283-0.1105-0.1081-0.1081-0.0833-0.0879-0.0744-0.104-0.114-0.0813
M-score -3.21-3.07-3.09-2.92-2.94-2.86-2.78-3.19-3.16-2.95
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