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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 -2.69.
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 * 1.0272||+||0.528 * 0.9622||+||0.404 * 0.9338||+||0.892 * 1.0485||+||0.115 * 1.0442|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.978||+||4.679 * -0.0312||-||0.327 * 1.0246|
|This Year (Oct15) TTM:||Last Year (Oct14) TTM:|
|Accounts Receivable was $4,712 Mil.|
Revenue was 12682 + 12843 + 12137 + 11936 = $49,598 Mil.
Gross Profit was 7832 + 7733 + 7525 + 7090 = $30,180 Mil.
Total Current Assets was $73,946 Mil.
Total Assets was $111,773 Mil.
Property, Plant and Equipment(Net PPE) was $3,346 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,350 Mil.
Selling, General & Admin. Expense(SGA) was $11,824 Mil.
Total Current Liabilities was $22,100 Mil.
Long-Term Debt was $21,594 Mil.
Net Income was 2430 + 2319 + 2437 + 2397 = $9,583 Mil.
Non Operating Income was -8 + -10 + 59 + 201 = $242 Mil.
Cash Flow from Operations was 2766 + 4138 + 3040 + 2883 = $12,827 Mil.
|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 $2,447 Mil.
Selling, General & Admin. Expense(SGA) was $11,530 Mil.
Total Current Liabilities was $20,056 Mil.
Long-Term Debt was $19,615 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)|
|=||(4712 / 49598)||/||(4375 / 47302)|
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)|
|=||(7733 / 47302)||/||(7832 / 49598)|
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 - (73946 + 3346) / 111773)||/||(1 - (66396 + 3233) / 103978)|
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))|
|=||(2447 / (2447 + 3233))||/||(2350 / (2350 + 3346))|
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)|
|=||(11824 / 49598)||/||(11530 / 47302)|
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)|
|=||((21594 + 22100) / 111773)||/||((19615 + 20056) / 103978)|
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|
|=||(9583 - 242||-||12827)||/||111773|
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 -2.60 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