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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 * 1.4189||+||0.528 * 1.0084||+||0.404 * 1.2793||+||0.892 * 1.1985||+||0.115 * 1.0577|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.962||+||4.679 * -0.0719||-||0.327 * 1.4827|
|This Year (Mar15) TTM:||Last Year (Mar14) TTM:|
|Accounts Receivable was $894 Mil.|
Revenue was 996.089 + 926.031 + 840.149 + 851.762 = $3,614 Mil.
Gross Profit was 827.429 + 753.187 + 700.084 + 689.393 = $2,970 Mil.
Total Current Assets was $1,911 Mil.
Total Assets was $5,353 Mil.
Property, Plant and Equipment(Net PPE) was $1,103 Mil.
Depreciation, Depletion and Amortization(DDA) was $333 Mil.
Selling, General & Admin. Expense(SGA) was $1,790 Mil.
Total Current Liabilities was $792 Mil.
Long-Term Debt was $564 Mil.
Net Income was 110.934 + 147.872 + 129.002 + 129.033 = $517 Mil.
Non Operating Income was 0.208 + -9.167 + 2.181 + 2.737 = $-4 Mil.
Cash Flow from Operations was 214.247 + 223.448 + 219.521 + 248.271 = $905 Mil.
|Accounts Receivable was $526 Mil.
Revenue was 784.761 + 795.328 + 727.83 + 707.561 = $3,015 Mil.
Gross Profit was 655.662 + 653.212 + 608.253 + 581.761 = $2,499 Mil.
Total Current Assets was $1,915 Mil.
Total Assets was $4,191 Mil.
Property, Plant and Equipment(Net PPE) was $845 Mil.
Depreciation, Depletion and Amortization(DDA) was $274 Mil.
Selling, General & Admin. Expense(SGA) was $1,552 Mil.
Total Current Liabilities was $612 Mil.
Long-Term Debt was $105 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)|
|=||(894.123 / 3614.031)||/||(525.8 / 3015.48)|
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)|
|=||(753.187 / 3015.48)||/||(827.429 / 3614.031)|
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 - (1911.281 + 1103.4) / 5352.605)||/||(1 - (1915.181 + 845.104) / 4191.348)|
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))|
|=||(274.291 / (274.291 + 845.104))||/||(332.704 / (332.704 + 1103.4))|
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)|
|=||(1789.569 / 3614.031)||/||(1552.174 / 3015.48)|
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)|
|=||((564.339 + 792.299) / 5352.605)||/||((104.827 + 611.667) / 4191.348)|
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|
|=||(516.841 - -4.041||-||905.487)||/||5352.605|
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 -2.28 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