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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.
Brocade Communications Systems Inc has a M-score of -2.95 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Brocade Communications Systems Inc was -1.02. The lowest was -3.98. And the median was -2.88.
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 * 0.9058||+||0.528 * 0.9562||+||0.404 * 0.9163||+||0.892 * 0.9948||+||0.115 * 1.5203|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.001||+||4.679 * -0.0813||-||0.327 * 0.9916|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $225 Mil.|
Revenue was 564.358 + 545.464 + 536.91 + 564.535 = $2,211 Mil.
Gross Profit was 377.118 + 361.713 + 354.292 + 372.67 = $1,466 Mil.
Total Current Assets was $1,658 Mil.
Total Assets was $3,734 Mil.
Property, Plant and Equipment(Net PPE) was $445 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $639 Mil.
Total Current Liabilities was $587 Mil.
Long-Term Debt was $595 Mil.
Net Income was 83.419 + 87.352 + -13.684 + 80.884 = $238 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 157.853 + 106.031 + 168.244 + 109.469 = $542 Mil.
|Accounts Receivable was $250 Mil.
Revenue was 558.8 + 536.551 + 538.784 + 588.729 = $2,223 Mil.
Gross Profit was 362.64 + 338.202 + 334.112 + 373.925 = $1,409 Mil.
Total Current Assets was $1,423 Mil.
Total Assets was $3,621 Mil.
Property, Plant and Equipment(Net PPE) was $473 Mil.
Depreciation, Depletion and Amortization(DDA) was $184 Mil.
Selling, General & Admin. Expense(SGA) was $642 Mil.
Total Current Liabilities was $561 Mil.
Long-Term Debt was $596 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)|
|=||(224.913 / 2211.267)||/||(249.598 / 2222.864)|
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)|
|=||(361.713 / 2222.864)||/||(377.118 / 2211.267)|
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 - (1658.005 + 445.433) / 3733.675)||/||(1 - (1422.803 + 472.94) / 3621.391)|
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))|
|=||(184.114 / (184.114 + 472.94))||/||(100.647 / (100.647 + 445.433))|
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)|
|=||(639.456 / 2211.267)||/||(642.155 / 2222.864)|
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)|
|=||((595.45 + 587.308) / 3733.675)||/||((596.208 + 560.663) / 3621.391)|
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|
|=||(237.971 - 0||-||541.597)||/||3733.675|
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 -2.95 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