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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 8 years, the highest Beneish M-Score of BroadSoft Inc was -1.37. The lowest was -2.84. And the median was -2.44.
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 * 0.9859||+||0.528 * 1.0194||+||0.404 * 1.1172||+||0.892 * 1.2961||+||0.115 * 1.0453|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0075||+||4.679 * -0.105||-||0.327 * 1.1867|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $92.7 Mil.|
Revenue was 73.136 + 89.591 + 69.097 + 64.484 = $296.3 Mil.
Gross Profit was 52.338 + 71.434 + 46.504 + 43.288 = $213.6 Mil.
Total Current Assets was $345.7 Mil.
Total Assets was $596.0 Mil.
Property, Plant and Equipment(Net PPE) was $19.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $19.2 Mil.
Selling, General & Admin. Expense(SGA) was $133.7 Mil.
Total Current Liabilities was $127.5 Mil.
Long-Term Debt was $191.4 Mil.
Net Income was -1.509 + 15.064 + -4.754 + -8.125 = $0.7 Mil.
Non Operating Income was 0.511 + 11.687 + -9.138 + 0.484 = $3.5 Mil.
Cash Flow from Operations was 19.079 + 26.54 + 4.554 + 9.563 = $59.7 Mil.
|Accounts Receivable was $72.5 Mil.
Revenue was 55.671 + 65.826 + 54.629 + 52.484 = $228.6 Mil.
Gross Profit was 39.661 + 51.061 + 39.618 + 37.623 = $168.0 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 $102.4 Mil.
Total Current Liabilities was $108.1 Mil.
Long-Term Debt was $98.5 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)|
|=||(92.7 / 296.308)||/||(72.544 / 228.61)|
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)|
|=||(71.434 / 228.61)||/||(52.338 / 296.308)|
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 - (345.72 + 19.907) / 596.03)||/||(1 - (283.713 + 15.877) / 458.09)|
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))|
|=||(16.744 / (16.744 + 15.877))||/||(19.205 / (19.205 + 19.907))|
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)|
|=||(133.657 / 296.308)||/||(102.355 / 228.61)|
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)|
|=||((191.418 + 127.484) / 596.03)||/||((98.487 + 108.053) / 458.09)|
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|
|=||(0.676 - 3.544||-||59.736)||/||596.03|
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 -2.72 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