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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 0.16. 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 * 0.9399||+||0.528 * 0.9669||+||0.404 * 0.9892||+||0.892 * 1.0163||+||0.115 * 1.6061|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0352||+||4.679 * -0.0366||-||0.327 * 1.0912|
|This Year (Apr15) TTM:||Last Year (Apr14) TTM:|
|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.
Net Income was 77.04 + 87.267 + 83.419 + 87.352 = $335 Mil.
Non Operating Income was 0 + -0.559 + 3.601 + 0 = $3 Mil.
Cash Flow from Operations was 201.874 + 10.393 + 157.853 + 106.031 = $476 Mil.
|Accounts Receivable was $194 Mil.
Revenue was 536.91 + 564.535 + 558.8 + 536.551 = $2,197 Mil.
Gross Profit was 354.292 + 372.67 + 362.64 + 338.202 = $1,428 Mil.
Total Current Assets was $1,536 Mil.
Total Assets was $3,609 Mil.
Property, Plant and Equipment(Net PPE) was $453 Mil.
Depreciation, Depletion and Amortization(DDA) was $151 Mil.
Selling, General & Admin. Expense(SGA) was $622 Mil.
Total Current Liabilities was $522 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)|
|=||(185.136 / 2232.636)||/||(193.804 / 2196.796)|
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)|
|=||(389.683 / 2196.796)||/||(372.209 / 2232.636)|
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 - (1751.329 + 439.789) / 3940.624)||/||(1 - (1536.434 + 452.722) / 3608.909)|
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))|
|=||(150.683 / (150.683 + 452.722))||/||(80.967 / (80.967 + 439.789))|
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)|
|=||(654.648 / 2232.636)||/||(622.231 / 2196.796)|
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)|
|=||((787.554 + 544.114) / 3940.624)||/||((595.452 + 522.189) / 3608.909)|
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|
|=||(335.078 - 3.042||-||476.151)||/||3940.624|
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 -2.68 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