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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 7 years, the highest Beneish M-Score of BroadSoft Inc was -1.38. The lowest was -2.82. And the median was -2.57.
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 * 1.0855||+||0.528 * 1.0273||+||0.404 * 1.1688||+||0.892 * 1.2507||+||0.115 * 0.9778|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8093||+||4.679 * -0.1061||-||0.327 * 1.0086|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $72.5 Mil.|
Revenue was 55.671 + 65.826 + 54.629 + 52.484 = $228.6 Mil.
Gross Profit was 39.859 + 51.042 + 39.618 + 37.623 = $168.1 Mil.
Total Current Assets was $283.7 Mil.
Total Assets was $458.1 Mil.
Property, Plant and Equipment(Net PPE) was $15.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $16.7 Mil.
Selling, General & Admin. Expense(SGA) was $101.7 Mil.
Total Current Liabilities was $108.1 Mil.
Long-Term Debt was $98.5 Mil.
Net Income was -2.006 + 9.091 + -2.292 + 1.665 = $6.5 Mil.
Non Operating Income was 1.707 + 0.562 + 0.907 + -0.206 = $3.0 Mil.
Cash Flow from Operations was 4.129 + 23.159 + 19.061 + 5.739 = $52.1 Mil.
|Accounts Receivable was $53.4 Mil.
Revenue was 43.918 + 51.959 + 42.9 + 44.009 = $182.8 Mil.
Gross Profit was 30.861 + 40.651 + 32.365 + 34.238 = $138.1 Mil.
Total Current Assets was $269.0 Mil.
Total Assets was $399.0 Mil.
Property, Plant and Equipment(Net PPE) was $11.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $11.9 Mil.
Selling, General & Admin. Expense(SGA) was $100.5 Mil.
Total Current Liabilities was $85.5 Mil.
Long-Term Debt was $92.9 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)|
|=||(72.544 / 228.61)||/||(53.433 / 182.786)|
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)|
|=||(51.042 / 182.786)||/||(39.859 / 228.61)|
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 - (283.713 + 15.877) / 458.09)||/||(1 - (269.045 + 11.855) / 399.025)|
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))|
|=||(11.946 / (11.946 + 11.855))||/||(16.744 / (16.744 + 15.877))|
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)|
|=||(101.721 / 228.61)||/||(100.497 / 182.786)|
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)|
|=||((98.487 + 108.053) / 458.09)||/||((92.88 + 85.491) / 399.025)|
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|
|=||(6.458 - 2.97||-||52.088)||/||458.09|
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 -2.56 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
BroadSoft Inc Annual Data
BroadSoft Inc Quarterly Data