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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 * 1.1041||+||0.528 * 0.9995||+||0.404 * 1.0219||+||0.892 * 1.0025||+||0.115 * 0.9152|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0516||+||4.679 * -0.0369||-||0.327 * 0.9877|
|This Year (Apr16) TTM:||Last Year (Apr15) TTM:|
|Accounts Receivable was $205 Mil.|
Revenue was 523.306 + 574.284 + 588.827 + 551.819 = $2,238 Mil.
Gross Profit was 350.311 + 388.815 + 394.277 + 371.904 = $1,505 Mil.
Total Current Assets was $1,740 Mil.
Total Assets was $3,993 Mil.
Property, Plant and Equipment(Net PPE) was $442 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $690 Mil.
Total Current Liabilities was $530 Mil.
Long-Term Debt was $802 Mil.
Net Income was 43.085 + 93.646 + 84.388 + 91.667 = $313 Mil.
Non Operating Income was 0 + 0 + 0.095 + 0 = $0 Mil.
Cash Flow from Operations was 112.432 + 112.2 + 180.267 + 54.965 = $460 Mil.
|Accounts Receivable was $185 Mil.
Revenue was 546.575 + 576.239 + 564.358 + 545.464 = $2,233 Mil.
Gross Profit was 372.209 + 389.683 + 377.118 + 361.713 = $1,501 Mil.
Total Current Assets was $1,751 Mil.
Total Assets was $3,941 Mil.
Property, Plant and Equipment(Net PPE) was $440 Mil.
Depreciation, Depletion and Amortization(DDA) was $81 Mil.
Selling, General & Admin. Expense(SGA) was $655 Mil.
Total Current Liabilities was $544 Mil.
Long-Term Debt was $788 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)|
|=||(204.915 / 2238.236)||/||(185.136 / 2232.636)|
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)|
|=||(1500.723 / 2232.636)||/||(1505.307 / 2238.236)|
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 - (1739.677 + 441.717) / 3992.973)||/||(1 - (1751.329 + 439.789) / 3940.624)|
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))|
|=||(80.967 / (80.967 + 439.789))||/||(90.399 / (90.399 + 441.717))|
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)|
|=||(690.124 / 2238.236)||/||(654.648 / 2232.636)|
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)|
|=||((802.482 + 530.306) / 3992.973)||/||((787.554 + 544.114) / 3940.624)|
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|
|=||(312.786 - 0.095||-||459.864)||/||3992.973|
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 -2.56 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