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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 -2.78.
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 * 0.8492||+||0.528 * 0.9914||+||0.404 * 1.0014||+||0.892 * 1.0839||+||0.115 * 1.0472|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0051||+||4.679 * -0.0935||-||0.327 * 1.0187|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $916 Mil.|
Revenue was 1257.819 + 1184.557 + 1215.962 + 1138.135 = $4,796 Mil.
Gross Profit was 1042.822 + 1001.587 + 1010.406 + 962.542 = $4,017 Mil.
Total Current Assets was $1,619 Mil.
Total Assets was $5,630 Mil.
Property, Plant and Equipment(Net PPE) was $1,553 Mil.
Depreciation, Depletion and Amortization(DDA) was $504 Mil.
Selling, General & Admin. Expense(SGA) was $2,464 Mil.
Total Current Liabilities was $845 Mil.
Long-Term Debt was $538 Mil.
Net Income was 149.691 + 169.979 + 166.454 + 150.36 = $636 Mil.
Non Operating Income was 3.687 + -0.417 + 2.47 + 1.681 = $7 Mil.
Cash Flow from Operations was 333.238 + 240.349 + 254.942 + 327.083 = $1,156 Mil.
|Accounts Receivable was $995 Mil.
Revenue was 1175.294 + 1127.887 + 1125.997 + 996.089 = $4,425 Mil.
Gross Profit was 976.078 + 937.304 + 933.675 + 827.429 = $3,674 Mil.
Total Current Assets was $1,828 Mil.
Total Assets was $5,562 Mil.
Property, Plant and Equipment(Net PPE) was $1,309 Mil.
Depreciation, Depletion and Amortization(DDA) was $452 Mil.
Selling, General & Admin. Expense(SGA) was $2,262 Mil.
Total Current Liabilities was $778 Mil.
Long-Term Debt was $563 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)|
|=||(915.815 / 4796.473)||/||(994.95 / 4425.267)|
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)|
|=||(3674.486 / 4425.267)||/||(4017.357 / 4796.473)|
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 - (1619.361 + 1552.524) / 5629.963)||/||(1 - (1827.833 + 1309.214) / 5561.984)|
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))|
|=||(452.225 / (452.225 + 1309.214))||/||(504.236 / (504.236 + 1552.524))|
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)|
|=||(2464.38 / 4796.473)||/||(2262.024 / 4425.267)|
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)|
|=||((537.552 + 845.401) / 5629.963)||/||((563.353 + 777.866) / 5561.984)|
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|
|=||(636.484 - 7.421||-||1155.612)||/||5629.963|
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 -2.99 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