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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 -2.83. And the median was -2.58.
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 * 1.2205||+||0.528 * 1.0242||+||0.404 * 1.1489||+||0.892 * 1.258||+||0.115 * 0.9347|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8754||+||4.679 * -0.1334||-||0.327 * 1.0363|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $91.3 Mil.|
Revenue was 64.484 + 55.671 + 65.826 + 54.629 = $240.6 Mil.
Gross Profit was 43.288 + 39.859 + 51.042 + 39.618 = $173.8 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 $112.1 Mil.
Total Current Liabilities was $114.2 Mil.
Long-Term Debt was $100.0 Mil.
Net Income was -8.125 + -2.006 + 9.091 + -2.292 = $-3.3 Mil.
Non Operating Income was 0.484 + 1.707 + 0.562 + 0.907 = $3.7 Mil.
Cash Flow from Operations was 9.563 + 4.129 + 23.159 + 19.061 = $55.9 Mil.
|Accounts Receivable was $59.5 Mil.
Revenue was 52.484 + 43.918 + 51.959 + 42.9 = $191.3 Mil.
Gross Profit was 37.623 + 30.861 + 40.651 + 32.365 = $141.5 Mil.
Total Current Assets was $264.4 Mil.
Total Assets was $419.0 Mil.
Property, Plant and Equipment(Net PPE) was $15.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.4 Mil.
Selling, General & Admin. Expense(SGA) was $101.8 Mil.
Total Current Liabilities was $89.3 Mil.
Long-Term Debt was $94.2 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)|
|=||(91.295 / 240.61)||/||(59.461 / 191.261)|
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)|
|=||(39.859 / 191.261)||/||(43.288 / 240.61)|
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 - (273.771 + 18.085) / 471.596)||/||(1 - (264.394 + 15.589) / 418.968)|
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))|
|=||(13.361 / (13.361 + 15.589))||/||(17.64 / (17.64 + 18.085))|
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)|
|=||(112.088 / 240.61)||/||(101.78 / 191.261)|
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)|
|=||((99.962 + 114.177) / 471.596)||/||((94.246 + 89.329) / 418.968)|
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|
|=||(-3.332 - 3.66||-||55.912)||/||471.596|
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 -2.60 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