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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 -2.86. And the median was -2.46.
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 * 0.8891||+||0.528 * 0.9916||+||0.404 * 0.9013||+||0.892 * 1.3031||+||0.115 * 1.0097|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9526||+||4.679 * -0.0986||-||0.327 * 1.1661|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $105.8 Mil.|
Revenue was 81.721 + 73.136 + 89.591 + 69.097 = $313.5 Mil.
Gross Profit was 59.175 + 52.338 + 71.434 + 46.504 = $229.5 Mil.
Total Current Assets was $384.3 Mil.
Total Assets was $616.6 Mil.
Property, Plant and Equipment(Net PPE) was $20.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $19.6 Mil.
Selling, General & Admin. Expense(SGA) was $136.9 Mil.
Total Current Liabilities was $131.9 Mil.
Long-Term Debt was $194.6 Mil.
Net Income was -2.895 + -1.509 + 15.064 + -4.754 = $5.9 Mil.
Non Operating Income was -0.185 + 0.511 + 11.687 + -9.138 = $2.9 Mil.
Cash Flow from Operations was 13.61 + 19.079 + 26.54 + 4.581 = $63.8 Mil.
|Accounts Receivable was $91.3 Mil.
Revenue was 64.484 + 55.671 + 65.826 + 54.629 = $240.6 Mil.
Gross Profit was 44.263 + 39.661 + 51.061 + 39.618 = $174.6 Mil.
Total Current Assets was $273.8 Mil.
Total Assets was $471.6 Mil.
Property, Plant and Equipment(Net PPE) was $18.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $17.6 Mil.
Selling, General & Admin. Expense(SGA) was $110.3 Mil.
Total Current Liabilities was $114.2 Mil.
Long-Term Debt was $100.0 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)|
|=||(105.775 / 313.545)||/||(91.295 / 240.61)|
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)|
|=||(174.603 / 240.61)||/||(229.451 / 313.545)|
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 - (384.275 + 20.483) / 616.554)||/||(1 - (273.771 + 18.085) / 471.596)|
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))|
|=||(17.64 / (17.64 + 18.085))||/||(19.603 / (19.603 + 20.483))|
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)|
|=||(136.921 / 313.545)||/||(110.305 / 240.61)|
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)|
|=||((194.562 + 131.889) / 616.554)||/||((99.962 + 114.177) / 471.596)|
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|
|=||(5.906 - 2.875||-||63.81)||/||616.554|
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 -2.86 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