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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.
BroadSoft, Inc. has a M-score of -2.58 suggests that the company is not a manipulator.
During the past 6 years, the highest Beneish M-Score of BroadSoft, Inc. was -2.10. The lowest was -2.77. And the median was -2.58.
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 BroadSoft, 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 * 1.2557||+||0.528 * 1.0452||+||0.404 * 1.2117||+||0.892 * 1.0828||+||0.115 * 1.017|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2364||+||4.679 * -0.1042||-||0.327 * 0.9735|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $66.6 Mil.|
Revenue was 51.959 + 42.9 + 44.009 + 39.625 = $178.5 Mil.
Gross Profit was 40.651 + 32.365 + 34.238 + 29.859 = $137.1 Mil.
Total Current Assets was $247.3 Mil.
Total Assets was $391.5 Mil.
Property, Plant and Equipment(Net PPE) was $10.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.8 Mil.
Selling, General & Admin. Expense(SGA) was $94.8 Mil.
Total Current Liabilities was $86.2 Mil.
Long-Term Debt was $91.5 Mil.
Net Income was 0.512 + -4.054 + -3.015 + -2.317 = $-8.9 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 9.615 + 13.924 + 3.496 + 4.899 = $31.9 Mil.
|Accounts Receivable was $49.0 Mil.
Revenue was 45.809 + 40.174 + 40.516 + 38.343 = $164.8 Mil.
Gross Profit was 37.441 + 32.449 + 32.195 + 30.271 = $132.4 Mil.
Total Current Assets was $227.1 Mil.
Total Assets was $326.9 Mil.
Property, Plant and Equipment(Net PPE) was $7.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.2 Mil.
Selling, General & Admin. Expense(SGA) was $70.8 Mil.
Total Current Liabilities was $65.6 Mil.
Long-Term Debt was $86.9 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)|
|=||(66.595 / 178.493)||/||(48.98 / 164.842)|
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)|
|=||(32.365 / 164.842)||/||(40.651 / 178.493)|
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 - (247.281 + 10.11) / 391.497)||/||(1 - (227.128 + 7.361) / 326.906)|
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))|
|=||(8.152 / (8.152 + 7.361))||/||(10.809 / (10.809 + 10.11))|
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)|
|=||(94.754 / 178.493)||/||(70.774 / 164.842)|
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)|
|=||((91.549 + 86.215) / 391.497)||/||((86.865 + 65.609) / 326.906)|
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|
|=||(-8.874 - 0||-||31.934)||/||391.497|
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.
BroadSoft, Inc. has a M-score of -2.58 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
BroadSoft, Inc. Annual Data
BroadSoft, Inc. Quarterly Data