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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 9 years, the highest Beneish M-Score of BroadSoft Inc was -1.92. The lowest was -2.84. And the median was -2.52.
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 * 0.9215||+||0.528 * 0.9844||+||0.404 * 1.2081||+||0.892 * 1.2228||+||0.115 * 1.0073|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0269||+||4.679 * -0.1111||-||0.327 * 0.9334|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $121.8 Mil.|
Revenue was 101.983 + 84.122 + 81.721 + 73.136 = $341.0 Mil.
Gross Profit was 77.903 + 60.369 + 59.175 + 52.338 = $249.8 Mil.
Total Current Assets was $358.7 Mil.
Total Assets was $651.2 Mil.
Property, Plant and Equipment(Net PPE) was $22.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.4 Mil.
Selling, General & Admin. Expense(SGA) was $157.1 Mil.
Total Current Liabilities was $130.9 Mil.
Long-Term Debt was $201.0 Mil.
Net Income was 5.825 + -0.605 + -2.895 + -1.509 = $0.8 Mil.
Non Operating Income was 8.74 + -2.99 + -0.185 + 0.511 = $6.1 Mil.
Cash Flow from Operations was 19.357 + 15.051 + 13.61 + 19.079 = $67.1 Mil.
|Accounts Receivable was $108.1 Mil.
Revenue was 89.591 + 69.097 + 64.484 + 55.671 = $278.8 Mil.
Gross Profit was 69.724 + 47.437 + 44.263 + 39.661 = $201.1 Mil.
Total Current Assets was $369.7 Mil.
Total Assets was $592.4 Mil.
Property, Plant and Equipment(Net PPE) was $19.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $18.7 Mil.
Selling, General & Admin. Expense(SGA) was $125.1 Mil.
Total Current Liabilities was $135.2 Mil.
Long-Term Debt was $188.3 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)|
|=||(121.817 / 340.962)||/||(108.113 / 278.843)|
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)|
|=||(201.085 / 278.843)||/||(249.785 / 340.962)|
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 - (358.669 + 22.626) / 651.2)||/||(1 - (369.656 + 19.481) / 592.374)|
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))|
|=||(18.684 / (18.684 + 19.481))||/||(21.394 / (21.394 + 22.626))|
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)|
|=||(157.076 / 340.962)||/||(125.093 / 278.843)|
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)|
|=||((201.015 + 130.891) / 651.2)||/||((188.331 + 135.15) / 592.374)|
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|
|=||(0.816 - 6.076||-||67.097)||/||651.2|
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 -2.78 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