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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.
China Information Technology Inc has a M-score of -6.85 suggests that the company is not a manipulator.
During the past 9 years, the highest Beneish M-Score of China Information Technology Inc was -0.32. The lowest was -7.73. And the median was -2.22.
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 * 0.278||+||0.528 * 0.8725||+||0.404 * 1.3911||+||0.892 * 1.536||+||0.115 * 0.4763|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.7562||+||4.679 * -0.8154||-||0.327 * 1.8372|
|This Year (Jun14) TTM:||Last Year (Sep12) TTM:|
|Accounts Receivable was $48.74 Mil.|
Revenue was 29.976 + 38.862 + 37.283 + 29.389 = $135.51 Mil.
Gross Profit was 11.779 + 9.59 + 7.686 + 8.451 = $37.51 Mil.
Total Current Assets was $86.83 Mil.
Total Assets was $194.06 Mil.
Property, Plant and Equipment(Net PPE) was $30.42 Mil.
Depreciation, Depletion and Amortization(DDA) was $15.58 Mil.
Selling, General & Admin. Expense(SGA) was $146.90 Mil.
Total Current Liabilities was $131.16 Mil.
Long-Term Debt was $0.26 Mil.
Net Income was 0.031 + -68.72 + -50.516 + -48.477 = $-167.68 Mil.
Non Operating Income was 1.717 + 2.636 + 1.524 + -0.307 = $5.57 Mil.
Cash Flow from Operations was -4.652 + 2.141 + -13.519 + 1.002 = $-15.03 Mil.
|Accounts Receivable was $114.14 Mil.
Revenue was 27.425 + 13.284 + 16.28 + 31.236 = $88.23 Mil.
Gross Profit was 3.391 + 2.875 + 5.782 + 9.257 = $21.31 Mil.
Total Current Assets was $166.75 Mil.
Total Assets was $337.20 Mil.
Property, Plant and Equipment(Net PPE) was $74.50 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.33 Mil.
Selling, General & Admin. Expense(SGA) was $54.46 Mil.
Total Current Liabilities was $124.22 Mil.
Long-Term Debt was $0.08 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)|
|=||(48.742 / 135.51)||/||(114.14 / 88.225)|
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)|
|=||(9.59 / 88.225)||/||(11.779 / 135.51)|
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 - (86.83 + 30.415) / 194.056)||/||(1 - (166.752 + 74.499) / 337.195)|
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))|
|=||(14.334 / (14.334 + 74.499))||/||(15.582 / (15.582 + 30.415))|
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)|
|=||(146.903 / 135.51)||/||(54.461 / 88.225)|
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)|
|=||((0.264 + 131.162) / 194.056)||/||((0.083 + 124.216) / 337.195)|
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|
|=||(-167.682 - 5.57||-||-15.028)||/||194.056|
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 -6.85 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
China Information Technology Inc Quarterly Data