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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 Broadcom Corp was -1.28. The lowest was -5.97. And the median was -2.90.
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 Broadcom Corp 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 * 1.0898||+||0.528 * 0.9671||+||0.404 * 0.9799||+||0.892 * 1.0263||+||0.115 * 1.1005|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9689||+||4.679 * -0.0501||-||0.327 * 0.9247|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $821 Mil.|
Revenue was 2058 + 2143 + 2260 + 2041 = $8,502 Mil.
Gross Profit was 1086 + 1131 + 1183 + 1036 = $4,436 Mil.
Total Current Assets was $4,556 Mil.
Total Assets was $12,062 Mil.
Property, Plant and Equipment(Net PPE) was $620 Mil.
Depreciation, Depletion and Amortization(DDA) was $357 Mil.
Selling, General & Admin. Expense(SGA) was $708 Mil.
Total Current Liabilities was $1,205 Mil.
Long-Term Debt was $1,593 Mil.
Net Income was 209 + 390 + 98 + -1 = $696 Mil.
Non Operating Income was 0 + 5 + 9 + -8 = $6 Mil.
Cash Flow from Operations was -25 + 633 + 461 + 225 = $1,294 Mil.
|Accounts Receivable was $734 Mil.
Revenue was 1984 + 2064 + 2146 + 2090 = $8,284 Mil.
Gross Profit was 980 + 1038 + 1102 + 1060 = $4,180 Mil.
Total Current Assets was $4,353 Mil.
Total Assets was $11,907 Mil.
Property, Plant and Equipment(Net PPE) was $617 Mil.
Depreciation, Depletion and Amortization(DDA) was $415 Mil.
Selling, General & Admin. Expense(SGA) was $712 Mil.
Total Current Liabilities was $1,592 Mil.
Long-Term Debt was $1,395 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)|
|=||(821 / 8502)||/||(734 / 8284)|
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)|
|=||(1131 / 8284)||/||(1086 / 8502)|
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 - (4556 + 620) / 12062)||/||(1 - (4353 + 617) / 11907)|
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))|
|=||(415 / (415 + 617))||/||(357 / (357 + 620))|
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)|
|=||(708 / 8502)||/||(712 / 8284)|
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)|
|=||((1593 + 1205) / 12062)||/||((1395 + 1592) / 11907)|
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|
|=||(696 - 6||-||1294)||/||12062|
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.
Broadcom Corp has a M-score of -2.59 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
Broadcom Corp Annual Data
Broadcom Corp Quarterly Data