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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 9 years, the highest Beneish M-Score of China Information Technology Inc was -1.50. The lowest was -6.14. And the median was -2.21.
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 China Information Technology 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 * 0.3088||+||0.528 * 1.0461||+||0.404 * 1.5017||+||0.892 * 0.8815||+||0.115 * 0.686|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.8442||+||4.679 * -0.5919||-||0.327 * 1.5956|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $23.81 Mil.|
Revenue was $76.15 Mil.
Gross Profit was $17.28 Mil.
Total Current Assets was $81.21 Mil.
Total Assets was $189.24 Mil.
Property, Plant and Equipment(Net PPE) was $31.53 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.60 Mil.
Selling, General & Admin. Expense(SGA) was $101.75 Mil.
Total Current Liabilities was $127.99 Mil.
Long-Term Debt was $0.31 Mil.
Net Income was $-119.24 Mil.
Non Operating Income was $4.16 Mil.
Cash Flow from Operations was $-11.38 Mil.
|Accounts Receivable was $87.49 Mil.
Revenue was $86.38 Mil.
Gross Profit was $20.50 Mil.
Total Current Assets was $143.78 Mil.
Total Assets was $287.42 Mil.
Property, Plant and Equipment(Net PPE) was $66.27 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.83 Mil.
Selling, General & Admin. Expense(SGA) was $62.59 Mil.
Total Current Liabilities was $122.06 Mil.
Long-Term Debt was $0.07 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)|
|=||(23.813 / 76.145)||/||(87.491 / 86.377)|
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)|
|=||( / 86.377)||/||( / 76.145)|
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 - (81.212 + 31.531) / 189.239)||/||(1 - (143.784 + 66.269) / 287.422)|
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))|
|=||(13.825 / (13.825 + 66.269))||/||(10.601 / (10.601 + 31.531))|
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)|
|=||(101.751 / 76.145)||/||(62.587 / 86.377)|
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)|
|=||((0.313 + 127.991) / 189.239)||/||((0.074 + 122.058) / 287.422)|
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|
|=||(-119.237 - 4.16||-||-11.378)||/||189.239|
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.
China Information Technology Inc has a M-score of -6.14 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
China Information Technology Inc Annual Data