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Brocade Communications Systems Inc (NAS:BRCD)
Beneish M-Score
-2.55 (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 -2.55 suggests that the company is not a manipulator.

BRCD' s Beneish M-Score Range Over the Past 10 Years
Min: -3.7   Max: -1.02
Current: -2.55

-3.7
-1.02

During the past 13 years, the highest Beneish M-Score of Brocade Communications Systems Inc was -1.02. The lowest was -3.70. And the median was -2.74.


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 * 1.0268+0.528 * 0.975+0.404 * 1.0015+0.892 * 1.0151+0.115 * 1.3813
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.043+4.679 * -0.0227-0.327 * 1.0769
=-2.55

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

This Year (Jul15) TTM:Last Year (Jul14) TTM:
Accounts Receivable was $200 Mil.
Revenue was 551.819 + 546.575 + 576.239 + 564.358 = $2,239 Mil.
Gross Profit was 371.904 + 372.209 + 389.683 + 377.118 = $1,511 Mil.
Total Current Assets was $1,714 Mil.
Total Assets was $3,904 Mil.
Property, Plant and Equipment(Net PPE) was $440 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $661 Mil.
Total Current Liabilities was $492 Mil.
Long-Term Debt was $792 Mil.
Net Income was 91.667 + 77.04 + 87.267 + 83.419 = $339 Mil.
Non Operating Income was 0 + 0 + -0.559 + 3.601 = $3 Mil.
Cash Flow from Operations was 54.965 + 201.874 + 10.393 + 157.853 = $425 Mil.
Accounts Receivable was $192 Mil.
Revenue was 545.464 + 536.91 + 564.535 + 558.8 = $2,206 Mil.
Gross Profit was 361.713 + 354.292 + 372.67 + 362.64 = $1,451 Mil.
Total Current Assets was $1,542 Mil.
Total Assets was $3,602 Mil.
Property, Plant and Equipment(Net PPE) was $448 Mil.
Depreciation, Depletion and Amortization(DDA) was $125 Mil.
Selling, General & Admin. Expense(SGA) was $624 Mil.
Total Current Liabilities was $504 Mil.
Long-Term Debt was $595 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)
=(199.919 / 2238.991) / (191.816 / 2205.709)
=0.08928977 / 0.08696342
=1.0268

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)
=(372.209 / 2205.709) / (371.904 / 2238.991)
=0.65798118 / 0.67481915
=0.975

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 - (1714.287 + 440.343) / 3904.065) / (1 - (1542.16 + 448.195) / 3601.89)
=0.44810601 / 0.44741372
=1.0015

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
=2238.991 / 2205.709
=1.0151

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))
=(125.479 / (125.479 + 448.195)) / (82.846 / (82.846 + 440.343))
=0.21872876 / 0.15834813
=1.3813

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)
=(660.551 / 2238.991) / (623.887 / 2205.709)
=0.29502173 / 0.282851
=1.043

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)
=((791.63 + 492.123) / 3904.065) / ((595.42 + 504.434) / 3601.89)
=0.3288247 / 0.30535469
=1.0769

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
=(339.393 - 3.042 - 425.085) / 3904.065
=-0.0227

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 -2.55 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

Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15
DSRI 1.07361.0840.76251.40750.99520.76450.8981.07780.90581.0246
GMI 0.9481.10970.91171.10830.89890.9850.96710.97510.95620.9819
AQI 1.09163.66491.46931.03040.96270.98250.88180.8950.91630.9907
SGI 1.30741.64781.1861.33131.07081.02691.04210.99330.99481.0236
DEPI 1.18680.77541.19770.9011.13840.96741.03350.96461.52031.1389
SGAI 1.0321.08331.05580.97361.13821.11710.9490.94641.0011.028
LVGI 0.63751.01821.9240.81680.85870.93780.89250.94580.99161.0617
TATA -0.09-0.0561-0.0782-0.0515-0.0456-0.1148-0.1101-0.0879-0.0823-0.0266
M-score -2.42-1.00-3.04-1.93-2.66-3.23-3.07-2.86-2.95-2.58

Brocade Communications Systems Inc Quarterly Data

Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15
DSRI 0.93141.07781.03790.83360.89260.90581.08650.93991.02681.0246
GMI 0.97360.97510.97350.95890.95350.95620.95980.96690.9750.9819
AQI 0.90620.8950.95930.85340.87090.91630.82710.98921.00150.9907
SGI 1.01470.99330.97030.97150.98360.99481.01111.01631.01511.0236
DEPI 0.98360.96460.99551.09451.26441.52031.76351.60611.38131.1389
SGAI 0.9460.94640.94990.9590.96011.0011.0281.03521.0431.028
LVGI 0.92780.94580.80350.94860.97840.99161.25131.09121.07691.0617
TATA -0.0829-0.0879-0.074-0.1036-0.1136-0.0819-0.0481-0.0366-0.0227-0.0264
M-score -2.94-2.86-2.78-3.19-3.16-2.95-2.71-2.68-2.55-2.58
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