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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 -2.85. 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 * 0.7955||+||0.528 * 0.9726||+||0.404 * 1.3604||+||0.892 * 1.2881||+||0.115 * 1.0109|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9663||+||4.679 * -0.1117||-||0.327 * 0.9932|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $104.5 Mil.|
Revenue was 84.122 + 81.721 + 73.136 + 89.591 = $328.6 Mil.
Gross Profit was 60.369 + 59.175 + 52.338 + 69.724 = $241.6 Mil.
Total Current Assets was $369.6 Mil.
Total Assets was $627.2 Mil.
Property, Plant and Equipment(Net PPE) was $19.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $19.9 Mil.
Selling, General & Admin. Expense(SGA) was $145.9 Mil.
Total Current Liabilities was $128.1 Mil.
Long-Term Debt was $197.8 Mil.
Net Income was -0.605 + -2.895 + -1.509 + 11.623 = $6.6 Mil.
Non Operating Income was -2.99 + -0.185 + 0.511 + 5.039 = $2.4 Mil.
Cash Flow from Operations was 15.051 + 13.61 + 19.079 + 26.54 = $74.3 Mil.
|Accounts Receivable was $102.0 Mil.
Revenue was 69.097 + 64.484 + 55.671 + 65.826 = $255.1 Mil.
Gross Profit was 47.437 + 44.263 + 39.661 + 51.061 = $182.4 Mil.
Total Current Assets was $401.6 Mil.
Total Assets was $581.8 Mil.
Property, Plant and Equipment(Net PPE) was $18.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $18.6 Mil.
Selling, General & Admin. Expense(SGA) was $117.2 Mil.
Total Current Liabilities was $119.3 Mil.
Long-Term Debt was $185.2 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)|
|=||(104.521 / 328.57)||/||(102.005 / 255.078)|
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)|
|=||(182.422 / 255.078)||/||(241.606 / 328.57)|
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 - (369.572 + 19.948) / 627.156)||/||(1 - (401.561 + 18.191) / 581.807)|
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))|
|=||(18.588 / (18.588 + 18.191))||/||(19.942 / (19.942 + 19.948))|
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)|
|=||(145.936 / 328.57)||/||(117.249 / 255.078)|
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)|
|=||((197.759 + 128.136) / 627.156)||/||((185.155 + 119.257) / 581.807)|
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|
|=||(6.614 - 2.375||-||74.28)||/||627.156|
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 -2.79 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