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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 -2.70.
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 * 0.9186||+||0.528 * 0.9743||+||0.404 * 0.9431||+||0.892 * 1.0313||+||0.115 * 1.0971|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9603||+||4.679 * -0.0312||-||0.327 * 1.0415|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $4,302 Mil.|
Revenue was 11927 + 12682 + 12843 + 12137 = $49,589 Mil.
Gross Profit was 7432 + 7832 + 7733 + 7525 = $30,522 Mil.
Total Current Assets was $75,005 Mil.
Total Assets was $112,642 Mil.
Property, Plant and Equipment(Net PPE) was $3,386 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,218 Mil.
Selling, General & Admin. Expense(SGA) was $11,488 Mil.
Total Current Liabilities was $22,799 Mil.
Long-Term Debt was $21,591 Mil.
Net Income was 3147 + 2430 + 2319 + 2437 = $10,333 Mil.
Non Operating Income was -63 + -8 + -10 + 59 = $-22 Mil.
Cash Flow from Operations was 3922 + 2766 + 4138 + 3040 = $13,866 Mil.
|Accounts Receivable was $4,541 Mil.
Revenue was 11936 + 12245 + 12357 + 11545 = $48,083 Mil.
Gross Profit was 7090 + 7333 + 7405 + 7006 = $28,834 Mil.
Total Current Assets was $67,882 Mil.
Total Assets was $104,922 Mil.
Property, Plant and Equipment(Net PPE) was $3,212 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,465 Mil.
Selling, General & Admin. Expense(SGA) was $11,600 Mil.
Total Current Liabilities was $20,034 Mil.
Long-Term Debt was $19,667 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)|
|=||(4302 / 49589)||/||(4541 / 48083)|
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)|
|=||(7832 / 48083)||/||(7432 / 49589)|
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 - (75005 + 3386) / 112642)||/||(1 - (67882 + 3212) / 104922)|
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))|
|=||(2465 / (2465 + 3212))||/||(2218 / (2218 + 3386))|
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)|
|=||(11488 / 49589)||/||(11600 / 48083)|
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)|
|=||((21591 + 22799) / 112642)||/||((19667 + 20034) / 104922)|
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|
|=||(10333 - -22||-||13866)||/||112642|
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 -2.71 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