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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 Cisco Systems Inc was -1.90. The lowest was -4.27. And the median was -2.71.
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 Cisco Systems 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 * 0.8703||+||0.528 * 1.0359||+||0.404 * 0.9598||+||0.892 * 0.969||+||0.115 * 0.9907|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0125||+||4.679 * -0.0448||-||0.327 * 1.1085|
|This Year (Oct14) TTM:||Last Year (Oct13) TTM:|
|Accounts Receivable was $4,375 Mil.|
Revenue was 12245 + 12357 + 11545 + 11155 = $47,302 Mil.
Gross Profit was 7333 + 7405 + 7006 + 5951 = $27,695 Mil.
Total Current Assets was $66,396 Mil.
Total Assets was $103,978 Mil.
Property, Plant and Equipment(Net PPE) was $3,233 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,437 Mil.
Selling, General & Admin. Expense(SGA) was $11,530 Mil.
Total Current Liabilities was $20,056 Mil.
Long-Term Debt was $19,615 Mil.
Net Income was 1828 + 2247 + 2181 + 1429 = $7,685 Mil.
Non Operating Income was -22 + 56 + 76 + 55 = $165 Mil.
Cash Flow from Operations was 2491 + 3612 + 3198 + 2873 = $12,174 Mil.
|Accounts Receivable was $5,188 Mil.
Revenue was 12085 + 12417 + 12216 + 12098 = $48,816 Mil.
Gross Profit was 7407 + 7347 + 7511 + 7343 = $29,608 Mil.
Total Current Assets was $62,796 Mil.
Total Assets was $100,741 Mil.
Property, Plant and Equipment(Net PPE) was $3,273 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,427 Mil.
Selling, General & Admin. Expense(SGA) was $11,752 Mil.
Total Current Liabilities was $21,728 Mil.
Long-Term Debt was $12,947 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)|
|=||(4375 / 47302)||/||(5188 / 48816)|
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)|
|=||(7405 / 48816)||/||(7333 / 47302)|
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 - (66396 + 3233) / 103978)||/||(1 - (62796 + 3273) / 100741)|
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))|
|=||(2427 / (2427 + 3273))||/||(2437 / (2437 + 3233))|
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)|
|=||(11530 / 47302)||/||(11752 / 48816)|
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)|
|=||((19615 + 20056) / 103978)||/||((12947 + 21728) / 100741)|
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|
|=||(7685 - 165||-||12174)||/||103978|
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.
Cisco Systems Inc has a M-score of -2.87 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
Cisco Systems Inc Annual Data
Cisco Systems Inc Quarterly Data