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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 -1.02. The lowest was -3.70. And the median was -2.74.
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|
|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
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)|
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)|
|=||(372.209 / 2205.709)||/||(371.904 / 2238.991)|
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 - (1714.287 + 440.343) / 3904.065)||/||(1 - (1542.16 + 448.195) / 3601.89)|
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))|
|=||(125.479 / (125.479 + 448.195))||/||(82.846 / (82.846 + 440.343))|
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)|
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)|
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|
|=||(339.393 - 3.042||-||425.085)||/||3904.065|
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.
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