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Brocade Communications Systems Inc (NAS:BRCD)
Beneish M-Score
-3.16 (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 -3.16 suggests that the company is not a manipulator.

BRCD' s 10-Year Beneish M-Score Range
Min: -10000000   Max: 0.16
Current: -3.16

-10000000
0.16

During the past 13 years, the highest Beneish M-Score of Brocade Communications Systems Inc was 0.16. The lowest was -10000000.00. And the median was -2.86.


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 * 0.8926+0.528 * 0.9535+0.404 * 0.8709+0.892 * 0.9836+0.115 * 1.2644
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9601+4.679 * -0.114-0.327 * 0.9784
=-3.16

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

This Year (Jul14) TTM:Last Year (Jul13) TTM:
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.
Net Income was 87.352 + -13.684 + 80.884 + 64.233 = $219 Mil.
Non Operating Income was 0 + 0 + 0 + 75.835 = $76 Mil.
Cash Flow from Operations was 106.031 + 168.244 + 109.469 + 169.769 = $554 Mil.
Accounts Receivable was $218 Mil.
Revenue was 536.551 + 538.784 + 588.729 + 578.357 = $2,242 Mil.
Gross Profit was 338.202 + 334.112 + 373.925 + 360.69 = $1,407 Mil.
Total Current Assets was $1,225 Mil.
Total Assets was $3,522 Mil.
Property, Plant and Equipment(Net PPE) was $488 Mil.
Depreciation, Depletion and Amortization(DDA) was $187 Mil.
Selling, General & Admin. Expense(SGA) was $661 Mil.
Total Current Liabilities was $503 Mil.
Long-Term Debt was $597 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)
=(191.816 / 2205.709) / (218.462 / 2242.421)
=0.08696342 / 0.09742238
=0.8926

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)
=(354.292 / 2242.421) / (361.713 / 2205.709)
=0.62741519 / 0.65798118
=0.9535

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 - (1542.16 + 448.195) / 3601.89) / (1 - (1224.587 + 487.944) / 3521.731)
=0.44741372 / 0.51372464
=0.8709

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
=2205.709 / 2242.421
=0.9836

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))
=(186.54 / (186.54 + 487.944)) / (125.479 / (125.479 + 448.195))
=0.27656698 / 0.21872876
=1.2644

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)
=(623.887 / 2205.709) / (660.599 / 2242.421)
=0.282851 / 0.29459187
=0.9601

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)
=((595.42 + 504.434) / 3601.89) / ((596.524 + 502.638) / 3521.731)
=0.30535469 / 0.31210845
=0.9784

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
=(218.785 - 75.835 - 553.513) / 3601.89
=-0.114

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 -3.16 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

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
DSRI 1.1260.76021.07361.0840.76251.40750.99520.76450.8981.0778
GMI 0.98540.97580.9481.10970.91171.10830.89890.9850.96710.9751
AQI 0.64460.40671.09163.66491.46931.03040.96270.98250.88180.895
SGI 1.13510.96291.30741.64781.1861.33131.07081.02691.04210.9933
DEPI 0.92191.03181.18680.77541.19770.9011.13840.96741.03350.9646
SGAI 0.82061.03331.0321.08331.05580.97361.13821.11710.9490.9464
LVGI 0.9480.83980.63751.01821.9240.81680.85870.93780.89250.9458
TATA 0.0017-0.0676-0.09-0.0561-0.0782-0.0515-0.0456-0.1148-0.1101-0.0879
M-score -2.35-3.25-2.42-1.00-3.04-1.93-2.66-3.23-3.07-2.86

Brocade Communications Systems Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
DSRI 0.7160.75810.8980.94281.04810.93141.07781.03790.83360.8926
GMI 0.96080.97610.96710.97010.97870.97360.97510.97350.95890.9535
AQI 0.98110.96850.88180.83940.91150.90620.8950.95930.85340.8709
SGI 1.00481.031.04211.04791.04811.01470.99330.97030.97150.9836
DEPI 1.00721.02661.03351.02091.00490.98360.96460.99551.09451.2644
SGAI 1.04250.98350.9490.93940.91930.9460.94640.94990.9590.9601
LVGI 0.91250.93720.89251.07350.95140.92780.94580.80350.94860.9784
TATA -0.1108-0.1286-0.1101-0.1078-0.1077-0.0829-0.0879-0.0744-0.104-0.114
M-score -3.26-3.28-3.07-3.09-2.91-2.94-2.86-2.78-3.19-3.16
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