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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 0.13. The lowest was -10000000.00. And the median was -2.86.
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 * 1.3682||+||0.528 * 1.0311||+||0.404 * 1.2888||+||0.892 * 1.017||+||0.115 * 0.8638|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0803||+||4.679 * -0.0414||-||0.327 * 1.384|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $278 Mil.|
Revenue was 590.721 + 523.306 + 574.284 + 588.827 = $2,277 Mil.
Gross Profit was 356.899 + 350.311 + 388.815 + 394.277 = $1,490 Mil.
Total Current Assets was $1,599 Mil.
Total Assets was $4,874 Mil.
Property, Plant and Equipment(Net PPE) was $460 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $726 Mil.
Total Current Liabilities was $701 Mil.
Long-Term Debt was $1,517 Mil.
Net Income was 10.495 + 43.085 + 93.646 + 84.388 = $232 Mil.
Non Operating Income was 0 + 0 + 0 + 0.095 = $0 Mil.
Cash Flow from Operations was 28.274 + 112.432 + 112.2 + 180.267 = $433 Mil.
|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.
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)|
|=||(278.18 / 2277.138)||/||(199.919 / 2238.991)|
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)|
|=||(1510.914 / 2238.991)||/||(1490.302 / 2277.138)|
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 - (1599.358 + 459.812) / 4873.765)||/||(1 - (1714.287 + 440.343) / 3904.065)|
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))|
|=||(82.846 / (82.846 + 440.343))||/||(103.217 / (103.217 + 459.812))|
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)|
|=||(725.762 / 2277.138)||/||(660.551 / 2238.991)|
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)|
|=||((1516.761 + 701.21) / 4873.765)||/||((791.63 + 492.123) / 3904.065)|
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|
|=||(231.614 - 0.095||-||433.173)||/||4873.765|
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 -2.34 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