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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 13 years, the highest Beneish M-Score of Brocade Communications Systems Inc was -1.01. The lowest was -3.72. And the median was -2.80.
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 * 1.1632||+||0.528 * 1.0443||+||0.404 * 1.3166||+||0.892 * 1.0363||+||0.115 * 0.7544|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0785||+||4.679 * -0.0395||-||0.327 * 1.3235|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $284 Mil.|
Revenue was 657.299 + 590.721 + 523.306 + 574.284 = $2,346 Mil.
Gross Profit was 420.314 + 356.899 + 350.311 + 388.815 = $1,516 Mil.
Total Current Assets was $1,673 Mil.
Total Assets was $4,940 Mil.
Property, Plant and Equipment(Net PPE) was $455 Mil.
Depreciation, Depletion and Amortization(DDA) was $124 Mil.
Selling, General & Admin. Expense(SGA) was $752 Mil.
Total Current Liabilities was $695 Mil.
Long-Term Debt was $1,502 Mil.
Net Income was 66.589 + 10.495 + 43.085 + 93.646 = $214 Mil.
Non Operating Income was -0.979 + 0 + 0 + 0 = $-1 Mil.
Cash Flow from Operations was 157.034 + 28.274 + 112.432 + 112.2 = $410 Mil.
|Accounts Receivable was $236 Mil.
Revenue was 588.827 + 551.819 + 546.575 + 576.239 = $2,263 Mil.
Gross Profit was 394.277 + 371.904 + 372.209 + 389.683 = $1,528 Mil.
Total Current Assets was $1,852 Mil.
Total Assets was $4,036 Mil.
Property, Plant and Equipment(Net PPE) was $439 Mil.
Depreciation, Depletion and Amortization(DDA) was $85 Mil.
Selling, General & Admin. Expense(SGA) was $673 Mil.
Total Current Liabilities was $562 Mil.
Long-Term Debt was $794 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)|
|=||(284.344 / 2345.61)||/||(235.883 / 2263.46)|
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)|
|=||(1528.073 / 2263.46)||/||(1516.339 / 2345.61)|
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 - (1673.01 + 455.326) / 4939.811)||/||(1 - (1852.199 + 439.224) / 4036.153)|
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))|
|=||(84.807 / (84.807 + 439.224))||/||(124.346 / (124.346 + 455.326))|
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)|
|=||(752.03 / 2345.61)||/||(672.853 / 2263.46)|
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)|
|=||((1502.063 + 694.652) / 4939.811)||/||((793.779 + 562.364) / 4036.153)|
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|
|=||(213.815 - -0.979||-||409.94)||/||4939.811|
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 -2.48 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
Brocade Communications Systems Inc Annual Data
Brocade Communications Systems Inc Quarterly Data