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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 13 years, the highest Beneish M-Score of Cerner Corp was -1.75. The lowest was -4.33. And the median was -2.75.
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 Cerner Corp 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 * 0.9627||+||0.528 * 1.001||+||0.404 * 0.7368||+||0.892 * 1.169||+||0.115 * 1.0121|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9485||+||4.679 * -0.0707||-||0.327 * 0.8385|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $616 Mil.|
Revenue was 926.031 + 840.149 + 851.762 + 784.761 = $3,403 Mil.
Gross Profit was 753.187 + 700.084 + 689.393 + 655.662 = $2,798 Mil.
Total Current Assets was $2,349 Mil.
Total Assets was $4,531 Mil.
Property, Plant and Equipment(Net PPE) was $924 Mil.
Depreciation, Depletion and Amortization(DDA) was $302 Mil.
Selling, General & Admin. Expense(SGA) was $1,642 Mil.
Total Current Liabilities was $634 Mil.
Long-Term Debt was $63 Mil.
Net Income was 147.872 + 129.002 + 129.033 + 119.526 = $525 Mil.
Non Operating Income was -9.167 + 2.181 + 2.737 + 2.99 = $-1 Mil.
Cash Flow from Operations was 223.448 + 219.521 + 248.271 + 155.787 = $847 Mil.
|Accounts Receivable was $547 Mil.
Revenue was 795.328 + 727.83 + 707.561 + 680.029 = $2,911 Mil.
Gross Profit was 653.212 + 608.253 + 581.761 + 552.8 = $2,396 Mil.
Total Current Assets was $1,762 Mil.
Total Assets was $4,098 Mil.
Property, Plant and Equipment(Net PPE) was $793 Mil.
Depreciation, Depletion and Amortization(DDA) was $264 Mil.
Selling, General & Admin. Expense(SGA) was $1,481 Mil.
Total Current Liabilities was $640 Mil.
Long-Term Debt was $112 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)|
|=||(615.629 / 3402.703)||/||(547.026 / 2910.748)|
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)|
|=||(700.084 / 2910.748)||/||(753.187 / 3402.703)|
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 - (2348.786 + 924.26) / 4530.565)||/||(1 - (1761.708 + 792.781) / 4098.364)|
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))|
|=||(263.538 / (263.538 + 792.781))||/||(302.353 / (302.353 + 924.26))|
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)|
|=||(1642.437 / 3402.703)||/||(1481.228 / 2910.748)|
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)|
|=||((62.868 + 634.315) / 4530.565)||/||((111.717 + 640.432) / 4098.364)|
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|
|=||(525.433 - -1.259||-||847.027)||/||4530.565|
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.
Cerner Corp has a M-score of -2.74 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
Cerner Corp Annual Data
Cerner Corp Quarterly Data